Cosmetologists who rent booth space at a salon are considered independent contractors and can treat rents paid as a deduction for income tax purposes. Independent cosmetologists must track all income as an independent contractor but also enjoy many of the same tax deductions as salon owner-operators. Other common deductions for cosmetologists include professional license fees, supplies and office expenses.
Cosmetologists can treat booth space rental the same for tax deduction as salon owners can deduct rents for their business space. The booth rental is deductible as a business expense against income received on your tax return. Cosmetologists should retain copies of all booth rental agreements with salon owners as well as rent payment receipts for tax return documentation.
As independent contractors, cosmetologists need regular supplies, such as brushes, combs, shampoo, hair conditioner and gels. These expenses are direct business expenses that can be directly deducted against income on a tax return. If the useful life of any business expense is less than one year, it can be deducted in the same year the cost is incurred. Equipment with a useful life of more than one year may not be fully deductible in the year purchased and special rules for depreciation of the expense may apply. Talk to your tax adviser regarding the immediate deduction of any expenses.
Cosmetologists may deduct costs for professional licenses and required education expenses to maintain licenses. Just as other professions are required to pay professional licensing fees, states may require continuing education for cosmetologists to have an active license and conduct business. Keep accurate records of all licensing requirements and continuing education expenses. This documentation includes receipts, invoices and a log of courses with specific dates and locations.
As an independent contractor, cosmetologists are required to track and withhold all taxes. Independent contractors are responsible for paying self-employment taxes for Social Security and Medicare. Employers normally pay half of these taxes, but as an independent contractor, you are responsible for the entire amount. At the time of publication, the current self-employment tax is 13.3 percent for the tax year. Self-employment tax is in addition to regular income tax. Quarterly estimated tax payments may be required to pay quarterly estimated taxes on IRS Form 1040 ES. Independent contractors must pay current-year quarterly estimated tax if they expect to owe $1,000 in tax for the year or if total withholding and credits is expected to be less than projected tax owed.