As a self employed personal trainer or fitness gym owner, operating the business on your own can become very overwhelming especially when you throw taxes in the mix. To simplify your job, below is a listing of tax deductions & credits that you should know.
Typical Tax Deductions
As the IRS states, all business tax deductions must be both “ordinary and necessary” or common & appropriate for your trade or business. In the case of a self-employed personal trainer or gym owner common business deductions include: music tapes, insurance, business-related meals, federal/state/local taxes, interest on any debt, rent expense, retirement plans, travel expenses for business purposes, office supplies, communication mediums (i.e. cell, fax, TVs, phone system), promotional/advertising expenses, and health insurance. While there are your typical tax deductions, you also want to be aware of the often overlooked deductions as detailed below.
1) Self Employment Tax (15.3% = 12.4% Social Security + 2.9% Medicare)
It is surprising how many self employed taxpayers miss this tax deduction which maybe be so obvious that it is overlooked. Please be aware that you can deduct 50% of your self employment tax.
2)Work at Home Tax Deductions
Believe it or not, if you work out of your home you can decipher between personal and business expenses for tax deduction purposes. For instance, an item such as a credit card machine would be an obvious direct business expense while rent expense would be treated as both a business & personal expense since it satisfies those two purposes. The way to calculate the business portion of the rent expense is to divide the amount of square feet used for business purposes by the total square footage of your home.
Personal versus Business Expense Scenario
If your entire home is 2,000 square feet and your business office is 500 square feet, you would be able to treat 500 divided by 2,000 or 25% of your of rent expense as a business expense. Please note that the business must be up and running to treat this expense as business expense. So if you launched your business in June, you could only claim the business expense from June onward.
Examples of expenses in which the business portion are deductible include: Real Estate Taxes, Qualified Mortgage, Insurance Premiums, Deductible Mortgage Interest, Rent, Casualty Loss, Utilities, Insurance, Depreciation, Security System, Repairs
3) Health Publications
Publications that the gym subscribes to or uses for educating clients can be treated as a tax deduction because it is common and appropriate in the trade.
4) Charitable Contributions
An example of this tax deduction would be donating old gym equipment to a qualified organization like a school. Tax deductions for donating to Haiti right now would also make sense.
5) Hiring Certain Employees Coming From Less Fortunate Groups
While trainers need to be fit, you can certainly hire certain employees for cleaning & admin work. There is the Work Opportunity Tax Credit which allows employers to deduct up to $2,400. Generally, the tax credit is 40% of the 1st $6,000 in 1st year wages or $2,400.
Tax Credits Are Higher For Certain Individuals
Disable Veterans Credit is up to – $4,800
Long-term Family Assistance Recipient – up to $9,000 if hired over 2 years