2024 & 2025 Tax Tips for Salon Owners: Maximize Your Deductions
Okay, salon owner, tax season is coming up, and if you’re self-employed, it can feel like you’re drowning in forms, deadlines, and numbers. But don’t worry—we’ve got your back! Whether you’re running your salon full-time or turning your side hustle into something bigger, we’ve got all the tax info you need to stay on top of your game. Let’s make sure you’re saving money and not losing sleep over taxes!
1. Are You Self-Employed?
Let’s start with the basics. If you own a business (like your fab salon), or you’re an independent contractor, you are self-employed. It’s that simple! No need to run a mega-corporation—whether you’re doing it full-time or part-time you are still considered self-employed.
And if you’re self-employed, you need to report your business income on your personal tax return (hello, Form 1040). Yep, you’re in charge of making sure all the taxes get paid. Don’t worry, we’ll guide you through it!
2. Self-Employment (SE) Tax: What Is It?
Here’s the deal: since you’re both the employee and the boss in your business, you’re responsible for paying a self-employment (SE) tax. This tax covers Social Security and Medicare, totaling 15.3% on your net earnings (on your business income after deducting expenses).
You’re not getting a paycheck with taxes already taken out, so you pay both the employee and employer parts of the tax. BUT you can deduct half of that 15.3% from your taxable income. So, you’re only paying half. How’s that for some good news?
3. Social Security and Medicare Benefits
Why does this matter? When you pay your SE tax, you’re actually funding your future Social Security and Medicare benefits—basically, your safety net for the future.
For 2024, you can earn one credit for every $1,730 in taxable income (up to four credits max). So, if you make $6,920 this year, you’ll max out your credits! And why does that matter? Because you need 40 credits to qualify for Social Security benefits when you retire. The more you make and report now, the more protected you’ll be when it’s time to kick back and relax. 🌴
4. Filing Your Taxes as a Salon Boss
Okay, let’s get into the forms. No need to freak out—here’s what you need to know:
• Form 1040: This is your main form where you report all your income (personal and business).
• Schedule C: If you’re running a solo show (like a one-person salon empire), this is where you’ll report your business income and expenses.
• Schedule SE: This calculates your self-employment tax based on your income after deductions.
If you and your partner are splitting the business profits, you may need to file as a partnership using Form 1065. But if you’re in a community property state (like California or Texas), you can treat your business as a Qualified Joint Venture (QJV), making it simpler.
Don’t be afraid to reach out to a tax pro—they’ll help you figure out the best option for your situation!
5. Estimated Tax Payments
Okay, let’s talk about estimated tax payments. Since you don’t have taxes automatically deducted from a paycheck, you’ll need to pay them yourself every quarter. The IRS wants you to pay throughout the year instead of dumping it all on them at once.
So, if you expect to owe $1,000 or more, you’ll need to pay quarterly. Here are the key dates to remember: April 15, June 15, September 15, and January 15.
But don’t worry—Salon Accounting has your back! With our Quarterly Tax Prep feature, we automatically calculate what you owe based on your earnings. No more stressing over those numbers!
6. What’s New for 2024 and 2025?
Here’s the scoop on the latest tax updates:
• Maximum Net Earnings for SE Tax: For 2024, the Social Security portion of SE tax will apply to earnings up to $168,600 (up from $160,200 in 2023). This increases to $176,100 in 2025.
• Bonus Depreciation: If you’re buying new equipment (hello, salon upgrades!), bonus depreciation is phasing out. In 2024, you’ll only be able to deduct 60% of the cost (down from 80%).
• Mileage Rate: If you’re driving for business, the IRS is raising the mileage deduction to 67 cents per mile in 2024, and 70 cents per mile in 2025. Score! 🚗
7. Depreciation Deduction (Sec. 179)
If you’re buying new salon gear (we see you leveling up your space!), Section 179 lets you deduct the entire cost of those purchases in the same year. This is like a tax superpower! 💪
For example, if you buy $100,000 in equipment, you could normally only deduct $20,000 per year over five years. But with Section 179, you get to deduct the full $100,000 all at once. Talk about a sweet deduction!
8. 20% Pass-Through Deduction (QBI)
Did you know you could deduct up to 20% of your business’s net income? This is called the Qualified Business Income (QBI) deduction, and it’s like a bonus for being a boss!
Let’s say your salon makes $100,000 in profit. You can reduce your taxable income by $20,000, meaning you’ll only pay taxes on $80,000 instead of the full amount. That could save you thousands! Some businesses don’t qualify, but there are exceptions—so be sure to chat with your tax pro to see if you can use this deduction to your advantage.
9. Vehicle Tax Deduction
Do you drive to meet clients or pick up supplies for your salon? You can deduct those miles! The IRS gives you two options for vehicle deductions:
• Business Mileage: Track how many miles you’re driving for business and deduct it using the IRS standard mileage rate.
• Actual Vehicle Expenses: Or, track actual costs (gas, repairs, insurance, etc.) and deduct a percentage based on how much you use the car for business.
Bonus: If your vehicle is over 6,000 pounds, you might be able to take advantage of bonus depreciation! 🚗💨
10. Travel Expense Deduction
If you’re traveling for business—whether it’s to a conference or a client meeting—you can deduct your flights, hotel, meals, and transportation.
Just keep in mind, if you extend the trip for personal reasons, only the business portion is deductible. But hey, you can still write off all the expenses during your 5-day conference!
11. Business Meals Deduction
Lunch with a client? Dinner with a vendor? You can usually deduct 50% of the cost—if it’s business-related. And if you’re traveling for business, meals during that trip can be 100% deductible.
Just make sure to keep your receipts and note who you were with and the business purpose. It’s as simple as saying, “Lunch with Sarah to talk about the new product line.”
12. Tax Filing Deadlines
For your 2024 taxes, you’ve got until April 15, 2025 to file. Need more time? You can request an extension until October 15, 2025. Just remember, while you get extra time to file, the IRS still wants you to pay by the original April 15 deadline to avoid penalties. So, get those payments in on time!
13. How to Pay Your Taxes
When it’s time to pay, you have a few options:
- Online via the IRS website or EFTPS system
- Phone through the IRS’s payment service
- Mail a check or money order with a payment voucher
Paying electronically is usually the quickest and easiest option, so keep that in mind!
See? Tax prep isn’t so scary once you break it down. With the right planning and helpful tools (like Salon Accounting!), you’ve got this. Stay organized, keep those receipts, and reach out to your tax pro if you need help.
Now, you’re ready to crush tax season! 😎
For more info, visit the IRS website at www.irs.gov