NAILS asked financial counselor Barbara Hargrove to review some commonly missed tax credits and deductions.
Unfortunately, the end of the year is not all about eggnog and evergreens. For most of us, it’s the end of the fiscal year, when salon owners’ thoughts naturally turn to income taxes and how to lower them. NAILS asked financial counselor Barbara Hargrove of General Business Services in Gloucester, Mass., to review some commonly missed tax credits and deductions. Since individual circumstances vary, you’ll want to consult your own tax professional for details.
Health insurance deduction. If you are self- employed, 45% of health insurance premiums paid on behalf of the sole proprietor, spouse, and dependents can be used as an adjustment to income, with the remainder of the premiums deductible on Schedule A (subject to the 7.5% of adjusted gross income limitation).
Consider putting a spouse on the payroll as a bona fide employee. For example, have the spouse help keep the books, and deduct health insurance covering the whole family on Schedule C (reducing both income and self-employment tax). But note, if there are employees other than the family, health insurance must be offered on the same basis to them in order to qualify.
New business equipment. Ordinarily, business equipment and furniture, such as a tanning bed or computer, can be depreciated over several years according to a required schedule. But you can deduct the full cost of a capital expenditure in the year of purchase up to $18,500 as a Section 179 expense. You must have net business income to qualify.
Child care credit. If you are paying the child care expenses for a child under age 13 so that both you and your spouse can work, you may be eligible for a tax credit from $480 to $1,440 depending on your expenses and adjusted gross income. The amount of expenses taken into account cannot exceed the lesser of the individual’s earned income or the earned income of the spouse.