As a massage therapist, you know how to take care of your clients’ well-being—but you might need some help of your own when it comes to tax time. We’ve got your back! Read on to learn about the top tax deductions you may be eligible for—they just might save some dollars at tax time.
The article below is accurate for your 2017 taxes, the one that you file this year by the April 2018 deadline, including a few retroactive changes due to the passing of tax reform. Some tax information below will change next year for your 2018 taxes, but won’t impact you this year. Learn more about tax reform here.
Preparing for Tax Deductions
While your massage certification certainly prepares you to help clients, it doesn’t necessarily help you come tax time. That was certainly the case for Nadine Crest, a Baltimore-based Registered Massage Practitioner and owner of Palms to Souls. “When I went to school, they didn’t give much instruction on being an entrepreneur,” says Crest. “I expected it to be easier to find and claim tax write-offs.”
While you can use this list to find potential tax write-offs, make sure you’re backing up each expense with documentation—in the form of receipts, statements or bills. Ideally, you’ll keep both a digital and hard copy of your documentation to ensure that all your deductions stand up to scrutiny, should the IRS ever require proof.
Training, Membership and Certification Costs
Getting the training you need to become a massage therapist doesn’t come cheap, but you may be able to deduct the cost of your education on your tax return using the Lifetime Learning Tax Credit. This deduction for higher education can provide a tax credit for up to $2,000, depending on your income level.
You can also deduct certification, licensing, and business association membership costs as business deductions. Because these costs can add up to thousands of dollars a year, they can make a big difference on the amount of tax you'll owe.
Business Startup Costs
Starting your business often comes with hefty equipment costs, especially if you’re going into a solo practice. Expenses include:
- massage tables, chairs and sheets
- stones and stone warmers&n
- towel heaters, and more
These all count as capital expenses—investments that you’ll use for more than a year. You can deduct a portion of these costs each year by using depreciation methods. Alternatively, you might be able to expenses these costs in a single tax year (up to $510,000 in 2017) instead of spreading out your deductions over several years if you are eligible for the Section 179 deduction.
Bonus Depreciation: Bonus depreciation has been changed for qualified assets acquired and placed in service after September 27, 2017. The old rules of 50% bonus depreciation still apply for qualified assets acquired before September 28, 2017. These assets had to be purchased new, not used. The new rules allow for 100% bonus "expensing" of assets that are new or used. The percentage of bonus depreciation phases down in 2023 to 80%, 2024 to 60%, 2025 to 40%, and 2026 to 20%. After 2026 there is no further bonus depreciation. This bonus "expensing" should not be confused with expensing under Code Section 179 which has entirely separate rules, see above.
The 100% expensing is also available for certain productions (qualified film, television, and live staged performances) and certain fruit or nuts planted or grafted after September 27, 2017.
50% bonus first year depreciation can be elected over the 100% expensing for the first tax year ending after September 27, 2017.
Ongoing Costs of Doing Business
As a massage therapist, you’ll also be able to deduct a variety of other ongoing costs, including:
- renting an office, studio, or spa space
- associated costs with the space, like electricity and water bills
- cost of supplies like massage oils, lotions, and aromatherapy
- legal costs, accounting fees, and tax preparation fees
- oils, lotions, and aromatherapy
Advertising and Marketing Expenses
Have you placed an ad in the local paper? Do you maintain a website for your business? Those expenses count as tax deductions, too. Keep track of ad placement costs, web hosting, and domain registration costs to claim those expenses on your return.
You may also be able to claim a portion of longer-term advertising expenses, like graphic design costs for the website you’ll use for several years, via amortization methods.
Home Office Tax Deductions
If you run your massage practice out of a dedicated home office that is used exclusively for your business, you can likely claim a portion of your home expenses, such as rent, homeowners' insurance, and utilities as business deductions. TurboTax will guide you through a few questions to find out if you’re eligible for these tax deductions.
Other Tax Deductions to Consider
Saving for retirement is especially important if you’re self-employed, so the Internal Revenue Service gives you a generous break on contributions to your traditional Individual Retirement Account, or IRA.
You may also be able to claim your health insurance premiums as a deduction on your income taxes.
If you use your car for work, you can deduct certain expenses as transportation costs, including the cost of gas, as well as capital expenses like vehicle purchases and repairs. Alternatively, you can usually deduct your car expenses based on the standard mileage rate set by the IRS each year.
You may also be able to deduct certain meals and entertainment expenses, provided they’re essential for running your massage business. Be sure to keep documentation for every business expense you claim.
Remember, with TurboTax, we’ll ask you simple questions and fill out the right tax forms for you to maximize your tax deductions.
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