Want to get the most out of tax season as a business owner? We know that taxes are one of the less glamorous parts of owning a business, but tax write offs can be huge for hair stylists. Salons enjoy a lengthy list of tax deductions that minimize their taxable income. We’ve provided a list of the most common salon tax write offs below, as well as what doesn’t qualify as tax deductible, how to handle capital expenses, and how to write business expenses off on your taxes (with a checklist template for you to use!). Let’s dive in.
1. Your Salon Tax Write Offs Checklist
To qualify as a business tax deduction, items must meet the criteria of being both ordinary (commonly accepted in the beauty industry) and necessary (“beneficial and appropriate” for your salon).
The business expenses listed below satisfy these conditions, but you must provide documentation for all of them. Keeping detailed expense records throughout the year is huge—especially in case of a potential audit from the IRS. Business owners usually keep their business receipts for at least three years after filing their taxes.
With that, the list of deductible expenses...
Hair Products, Tools & Supplies
Yes, the tools of the most beautiful trade can be deducted, and are the most common tax deductions. In fact, the list extensive list indeed.
It includes the cost of haircare products, such as:
- Shampoo
- Conditioner
- Styling product (wax, gel, hairspray, etc.)
- Hair coloring product
- Hair removal wax
- Styling tools, such as:
- Blow dryers
- Stationary hair dryers
- Curling irons
- Straightening irons
- Shears
And, finally, items that qualify as “ordinary & necessary,” which are needed for daily operation, such as:
- Towels
- Mirrors
- Rollers
- Foil
- Clips
- Clamps
- Processing caps
- Capes
- Aprons
Salon Furniture & Equipment
You may already know that salon chairs, chairback covers, shampoo stations, styling tools, appliance holders, carts, trays, and other equipment used in your salon are deductible.
So are the following:
- Waiting area furniture (chairs, couch, coffee table, etc.)
- Subscriptions to waiting area magazines
These go a long way when maximizing your tax returns.
Training & Education
Continuing education classes, seminars and conventions, as well as associated travel costs like gas mileage, hotel fees and meals, are deductible.
Subscriptions to salon and beauty trade journals that feature new techniques or styling methods also qualify, as they contribute toward professional development.
Licensing
If necessary, you can write off recertifications, license renewals and new hair stylists’ licenses. You may also deduct travel expenses and any money spent on meals if you must travel for these renewals or exams.
Employee/Staff Expenses
If you own a salon salon, you can write off the salaries, wages, and benefits paid to employees, including stylists, receptionists, and other staff members. A strong payroll platform, like Vagaro Payroll, compiles and stores this data for easy access whenever you need it.
The cost of training and educating your salon staff are also deductible, as are salon uniforms. There are also possible tax benefits connected to retirement plans you offer to your employees or set up for yourself.
Travel & Transportation
Expenses for business travel, such as airfare, lodging, and meals may be deductible. Local business travel costs, such as fuel, parking, and maintenance for salon vehicles, may also be deductible.
Marketing & Advertising
Any costs that you incur advertising your salon can be written off. This includes:
- Website setup & hosting fees
- Online ads
- Newspaper, radio & TV ads
- Business cards, fliers & other marketing collateral
- Outdoor signage
- Trade show fee expenses
- Promotional Items
If you hosted events or contests in which you gave away prizes, like beauty products or tools—save those receipts! These prizes are deductible.
Insurance
Premiums paid for business insurance coverage, including liability insurance, business property insurance, and workers' compensation insurance, are deductible. Health insurance premiums, however, are not.
Office Expenses
These can include maintenance of the office, insurance or supplies you use, such as printers, paper and related expenses.
Home Office Deduction
The IRS has strict guidelines around this one, but if you use any part of your home exclusively for running your salon, then you may be eligible for a home office deduction.
Rent & Utilities
A hair stylist can deduct the expense of their rent & utilities (including water, electricity, heating, and cooling costs for the salon) But only IF they rent or lease some kind of salon space.
2. Salon Capital Expenses Overview
Capital expenses are vital investments in your salon that enhance its long-term value, and should absolutely be considered when deducting business expenses. Examples include chairs, hair dryers, interior decor, renovations, salon technology, security systems, point-of-sale (POS) systems, salon software, and more.
Depreciation Basics
Depreciation is the process of distributing the cost of an asset over its useful life. For salon equipment, the IRS often considers a 5-year recovery period.
Example: Styling Station Upgrade
Suppose you invest $20,000 in upgrading styling stations. Let’s figure this out using the IRS’s Modified Accelerated Cost Recovery System (MACRS):
Without Salvage Value: Annual depreciation would be $4,000 ($20,000 divided by 5 years). Deduct $4,000 each year on your tax return for 5 years.
With Salvage Value: If the estimated salvage value of a styling chair is $200, annual depreciation would be ($1,200 - $200) divided by 5 years = $200 per year. Deduct $200 annually, accumulating a total deduction of $1,000 over 5 years.
If you have trouble, remember the following equation:
Annual Depreciation = (Cost of Equipment - Salvage Value) divided by Useful Life.
Important!
Capital expense rules are complex and subject to changes. Consult a tax professional for accurate classification and understanding applicable depreciation methods for these assets.
3. What is NOT Tax Deductible
Some of the most common expenses that hair stylists and salon owners CANNOT write off include:
- Personal Expenses: Clothing, grooming and other expenses that are unrelated to your salon.
- Personal Loans: Personal loan interest or credit cards used for personal expenses.
- Personal Entertainment: Entertainment or activities not associated with client meetings or salon business development.
- Personal Retirement Accounts: Contributions to retirement accounts, such as an Individual Retirement Account (IRA).
- Personal Travel Costs: Personal vacations and other travel expenses unrelated to your salon.
- Personal Legal Violations & Fines: Regulatory violations, overdue payment penalties, traffic violations, tax penalties, and legal fees unrelated to your salon.
- Personal Home Expenses: Expenses such as mortgage interest, property taxes, and utilities—without a qualified home office.
You might have noticed the theme above. For items to qualify as write-offs, they must be related and/or essential to the daily operation of your salon. They cannot be for your personal benefit, but rather for the benefit of your salon.
4. How to Organize Your Write Offs (W/ Template!)
Now, it’s time to claim your write-offs. Consider these steps:
Keep Detailed Records
Save all your receipts, invoices and other documents related to business expenses. Salon owners who use Vagaro have certain expense-related records and reports at their fingertips whenever they need them.
Separate Personal & Business Finances
Use separate bank accounts and credit cards for personal and business expenses. Doing so makes record-keeping easier and proves that expenses are business-related.
Create a Tax Deduction Checklist
Create a deductions checklist and group each business expense into specific categories such as:
- Business Expenses
- Employee Expenses
- Marketing & Advertising
- Insurance Costs
- Travel & Transportation
- Capital Expenses
We’ve provided this sample write-offs checklist for you, created using the Vagaro Forms feature, which will save you time when preparing your tax returns!
5. How To Write Off Your Expenses
Now, it’s time for part two, which is declaring your deductions using the correct forms with the Internal Revenue Service (IRS).
Complete the Schedule C Form
Report business income and expenses on Schedule C (Profit or Loss from Business), which is part of the individual tax return (Form 1040). Schedule C is used to calculate the net income or loss from your business.
Include Business Income
Report all income generated by your salon on Schedule C, including taxable income from services, retail sales, and any other sources of business income.
Deduct Business Expenses
Subtract qualified business expenses—supplies, marketing, etc.— from your total income to calculate your net profit or loss.
Depreciation Deduction
Any equipment or assets bought that have a useful life beyond one year may be eligible. Consult a tax professional for the right depreciation methods and schedules.
Home Office Deduction
If this deduction (described above) applies to you, you’d claim it on Form 8829.
File Federal & State Tax Returns
Complete and file your federal and state income tax returns by deadline. The tax return should include the Schedule C form and any additional forms related to specific deductions.
Important!
This article is not meant as tax advice, but a resource to clarify what write-offs are, what they aren’t, and the process for deducting them. Familiarize yourself with tax laws and work with a qualified tax professional to ensure compliance.
Hair stylists and salon owners can potentially save thousands of dollars by writing off many of their business expenses. It simply requires keeping accurate and organized records and including receipts & invoices throughout the year. Consult a tax professional who specializes in small businesses or the salon industry to ensure that all eligible deductions are claimed while following proper laws & regulations. We also suggest using business management software that comes with a tax-compliant payroll platform and easy-to-use record keeping features. Vagaro can help with many of your business needs, whatever stage you’re at. Start your FREE 30-day trial and experience how Vagaro can help take the pain out of tax season!
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