Maximizing Tax Deductions as a Personal Trainer or Coach
It’s time to learn out the top tax write-offs for your fitness business. Of course, always check with your CPA or attorney to ensure you are compliant based on your local, state or national laws.
Having a home business can be the most fulfilling thing ever. Being an independent personal trainer, nutrition coach, or certified health coach you get to have your schedule, no one orders you around, nor talks down on you. All the while, you enjoy a healthy job helping people stay fit.
Launching your fitness business start-up has its perks, but it also comes with challenges like managing the accounting and taxation of the business. Tax planning is better than excessive tax “paying”.
Having to pay taxes out of your hard-earned money from your personal training business does not feel pleasant. An amount as significant as 20% of your annual income can feel like a big dent in your pocket. Hence, in this article, we will tell you how to save hundreds of dollars (maybe thousands) in taxes by minimizing your taxable income legally and ethically.
Smaller Taxable Income Means Lesser Taxes
If you’re a self-employed personal trainer or nutritionist and NOT an employee, you can claim tax deductions for business expenses incurred on your tax return. The more the legal tax deductions, the lesser your taxable income will be.
Your annual income is $40,000, and the tax rate for the year is 20%. Your tax bill would amount up to $8,000. However, if you managed to claim tax deductions of, let’s say, $5,000, your taxable income would reduce to $35,000. Now, you will be saving $1,000 by paying a tax bill of $7,000 instead of $8,000.
Standard Deductions You Can Claim
Following is the list of tax deductions or write-offs a self-employed fitness trainer can claim while operating from home to minimize their tax expense:
- Start-up Cost:
If it’s your first year of business, you can claim tax deductions on investing in equipment, website development, marketing expenses, and any cost incurred to find a location for your setup.
Similarly, if you have opted for online training during COVID19 to practice social distancing, you can claim tax deductions for the laptop, microphone, headphones, or any other equipment bought to provide online training services to your clients.
- Home Office/Gym Setup Expenses:
You can claim the most significant deduction by setting up your business at your home. You can proportionately split your home rent/mortgage interest and utility bills into personal expenses and business expenses, depending on the area your office space consumes.
For example, your office is designated over 250 square feet within the four walls of your home, constituting 1250 square feet. Divide 250 by 1250, and you’ll get the percentage of office space being used i.e., 20%.
Just multiply your rent with the percentage, and you’ll get the amount of rent you can claim as a deduction on your tax return.
- Car Expenses or Mileage Deduction:
If you use a personal vehicle to commute for your fitness business’ purposes, you will have to calculate the part of your car expenses incurred in the business’ course to claim a deduction.
You can either deduct a portion of actual expenses incurred, which includes gas, insurance, depreciation, maintenance, etc., or you could claim a deduction per mile driven.
The standard mileage rate for the current tax year is 57.5 cents or $0.575 as per IRS. To calculate the amount of mileage deduction, keep track of the miles you drove throughout the year and multiply it to the standard deduction rate ($0.575).
The miles that count for deduction include travels from the home office to the gym or the client’s home.
- Equipment and Gear:
Weights, workout machines, mats, speakers, and any other equipment you’ve bought solely to provide services to your clients could be qualified as a deduction. This may also include water bottles, dispensers, towels you regularly offer to your customers.
- Subscriptions and Memberships:
You can also claim tax deductions on playing music for your clients during workout or cycling sessions, or providing magazines and video tutorials. All supplies purchased, such as magazine subscriptions, streaming services, video tutorials, workout DVDs, and paid downloads, could be deductible if used solely for the client.
Similarly, the fee you pay for a business license, personal trainer insurance, and memberships in professional organizations is tax-deductible.
IRS also allows tax deductions on any meetings you hold with your colleague or client over coffee, lunch, or dinner. You get to deduct 50% of the restaurant bill you pay for such meetings.
If you’re continuing to acquire training to improve your skills by attending fitness seminars and conventions, purchasing relevant books and audios, enrolling in nutrition coaching courses, etc., all will qualify as a deduction. The cost of any education related (in some way) to your current fitness business is tax-deductible.
- Retirement Fund Contributions:
Having a retirement account isn’t only a way of securing your future but also to minimize taxes. Self-employed Pensions Individual Retirement Arrangement (SEP-IRA) allows you to contribute up to 20% of your earnings annually. You can claim deduction on the contributions you make towards your SEP-IRA accounts.
How to Claim Tax Deductions
Now that you know you can claim deduction on ANY business-related expenses, you also need to know that IRS requires proof that you incurred those expenses and whether they were business-related.
You’ll have to establish a habit of always documenting your receipts and tracking your miles. For you to claim tax deductions, the IRS requires you to provide documents. For example, to claim a rent deduction, you shall specify exact square footage of your house and your home office space, both, with proof. Similarly, you’ll have to provide a log of all the miles traveled for business purposes. To claim deduction on start-up costs, you’ll have to provide all receipts of the purchases you made and so on.
Once you have comprehensive documentation of your expenses, you’ll also always be prepared for IRS audits to prove the occurrence and accuracy of all tax deductions you claimed.
Figuring out taxes yourself, especially if it’s your first year of business, can be quite daunting. You can always hire tax experts to help you file your tax returns. Trust me; it will be worth the reduction in your tax bill!
Check out this list of fitness careers that let you follow your dreams which includes what it takes to start a career in personal fitness training. This is your most affordable and fastest way to become a highly qualified personal trainer.
Is your re-certification coming up? Learn more about earning your CEU credits. You can find the full list of CEU courses here.
If you are ready to start your online personal training or coaching business, don’t forget to learn more about our online coaching course.
Remember, NESTA and Spencer Institute coaching programs are open to anyone with a desire to learn and help others. There are no prerequisites!
That’s it for now. Take action!