Cutting Your Taxes: Tax Tips for Beauticians & Barbers

There are many tax tips for beauticians and barbers that can help you keep more money.

There are many tax tips for beauticians and barbers that can help you keep more money.

If you’re a beautician, hair stylist, or barber, you’re probably used to cutting hair on a daily basis. What you may not be an expert at is how to cut your taxes and keep more of your money. Consider these tax tips for beauticians and barbers to help reduce your next tax bill from Uncle Sam:

Consider setting up a formal legal entity for your business.

If you run Jodie’s Hair Salon, having a formal name is one thing. But you should consider establishing your salon as a formal legal entity, such as an LLC, S corporation, or C corporation. Business entities allow their owners to take advantage of more IRS business tax deductions, give them added credibility, and can also reduce the chances of an audit.

Claim all eligible tax deductions for beauticians & barbers.

As a self-employed professional in the beauty industry, you may be eligible to claim these deductions on business expenses when filing your return:

  • Property rental costs for your salon
  • Maintenance expenses for property, i.e. utilities, a cleaning service, structural repairs
  • Equipment, i.e. computers, cash registers, furniture, lighting fixtures, barber chairs, scissors, razors, hygiene supplies, hairdryers, window displays, office supplies
  • Cost of goods sold, i.e. hair care products, shampoo, conditioner, hair gel, hairspray, etc.
  • Employee salaries, insurance, retirement accounts, sick leave, vacation pay, awards, bonuses, etc.
  • Depreciation on property
  • Fees for accounting, legal, and other professional service providers
  • Property insurance, liability insurance, etc.
  • Marketing/advertising expenses to spread the word about your hairstyling services
  • Business gifts to customers (limited to $25 per recipient per year)

Remember that tips are considered taxable income.

Cash tips you receive from your customers are considered taxable and are subject to federal income taxes, along with Social Security and Medicare taxes. Tips are also subject to taxation through your state income tax – if you operate your business in a state with such a tax.

Account for property taxes.

If you operate a beauty salon or barber shop in a space that you’ve purchased, you are likely on the hook for property taxes. These taxes can take a big bite out of your budget, especially if you operate your salon in a high-traffic area or downtown in a major city.

Account for possible sales taxes.

Generally speaking, a service like a haircut is not considered taxable. However, if you sell hair care products like shampoo or hairspray, you’ll need to collect sales taxes from your customers who purchase these items from your business. Be aware of your local area’s sales tax rates. If you have multiple salons, these rates could vary by location.

Get more tax tips for beauticians and barbers – along with tax tips for all professions – by working with the accounting pros at 1-800Accountant. Call 1-800-222-6868 or check out the “Services” page on www.1800accountant.com.

Photo credit: The photograph included in this blog post is used with permission via the Flickr Creative Commons license.

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