In a previous article, we discussed the differences between being an “Employee” Personal Trainer vs. being a “Self-Employed” Personal Trainer. In this article, however, we will dive deeper into the tax benefits for “Self-Employed” Personal Trainers.
Tax Organization For Self-Employed Personal Trainers
Before you consider taking advantage of tax law for being a self-employed personal trainer, make it a habit to stay organized. No matter if you file your taxes yourself, work with a competent tax professional, or outsource everything, this is a critical point.
Getting and staying organized involves many things and could range from the following:
- Working with a professional accountant or bookkeeper for your personal training business
- Being diligent about utilizing software such as Quicken (or something similar) to manage your P & L
- Staying on a weekly or monthly cadence of balancing your profit & loss (P & L) statement
- Keeping all receipts and invoices, and ideally having digital copies saved on your computer
- Being proactive with potential tax-savings strategies that need to be considered before the end of the taxable year
Depending on how large or complicated your personal training business is, you may not have to worry about each bullet listed above. However, even if you are a solo entrepreneur, you will be in a much better position to take advantage of the tax benefits for self-employed personal trainers if you can check all of those boxes.
Understanding Form Schedule C For Self-Employed Personal Trainers
Even though you may not personally complete the primary tax form (Form Schedule C) associated with self-employed individual (Sole Proprietorship), it is important that you have a basic understanding of the form.
On a high level, your income and expenses will be clearly laid on on this form, where you will then be able to calculate your Net Profit (or Loss). As a self-employed personal trainer, your gross income will be the total amount of revenue made from all of your services to your clients. This “gross income” number is before any expenses or taxes are considered. This number is much more straightforward and easier to calculate (especially if you are staying organized).
When we look at the “expenses” section, Form Schedule C starts to get complicated. However, this is also where the tax deductions come into play. Form Schedule C lists many expenses, but some of the most important for any self-employed personal trainer are the following:
- Car and truck expenses
- Commissions and fees
- Contract labor
- Employee benefit programs
- Insurance (other than health)
- Interest (mortgage or other)
- Legal and professional services
- Office expenses
- Pension and profit-sharing plans
- Rent or lease (vehicles, machinery, equipment, or other business property)
- Repairs and maintenance
- Taxes and licenses
- Travel and meals
- Expenses for business use of home
As you can see by this long list, these are very broad categories. It may not be clear to you right away on whether some of your business expenses would be covered or not. Therefore, it is always beneficial to keep organized records of all of your expenses.
After taking your gross income and subtracting out your expenses, this number will be your Net Profit (or Loss). This number will become your “self-employment income”.
As a self-employed personal trainer, it is in your best interest to make sure that you take advantage of all of the tax deductions and strategies that you are allotted. This is where the tax benefits start to come into play for being a self-employed business owner.
Tax Deductions For Self-Employed Personal Trainers
The major tax planning strategy that will effectively lower your tax liability comes from “business tax deductions”. By strategically and legally taking advantage of these deductions, you will be able to reduce your overall taxes.
Because a self-employed personal trainer is a business owner or an independent contractor, the current tax law allows for these deductions, even if you choose to take the Standard Deduction (as opposed to Itemizing your deductions).
In simplified terms (and as discussed earlier), business tax deductions are expenses that you incur from your business that the IRS allows you to “deduct” from your income. By deducting (or subtracting) away a certain dollar amount of expenses from your income, you end up with a lower dollar amount of “self-employment income”. You will then be taxed on this lower total dollar amount of your income, at your applicable tax rate. Another great thing is that because you have lowered your “self-employment income”, the amount of income that will be subject to what is called “self-employment FICA tax” (which is 15.3%), will also be lowered.
Less money for Uncle Sam and more money for you!
Previously in this article, we shared the exact categories of deductions that are outlined on Form Schedule C. Below, we will go a step further and summarize the typical expenses that are deductible for self-employed personal trainers. Even though every personal training business may looking different, there are still common expenses that all self-employed personal trainers will have.
Deductions For “Where You Train Your Clients”:
No matter if you train your clients virtually, have a home/garage gym, rent space, or own your own training facility, it is important that you take advantage of this deduction. If you are solely renting space at a private training studio to train your clients, that expense is much more straightforward. However, if you are training clients out of your home or garage gym, you want to make sure that you are properly accounting for how the IRS wants you to calculate “business use of home”. This one can get tricky if you are also using the home or garage gym for personal use.
Deductions For “Traveling To Meet Your Clients For Training Sessions”:
Maybe instead of training clients at your home or at a training facility, your style is more in the camp of training your clients at parks or beaches. If this is the case, you are able to deduct costs related to the business use of your vehicle. This is one of the major tax benefits for self-employed personal trainers. Not only does this apply when traveling to meet with clients, but it would also apply if you were traveling to attend educational workshops, conferences, or other continuing education. The key is that it is all business-related.
Finally, it is important to note that there are different methods of claiming this deduction (standard vs. actual). One way may be more beneficial than the other given your specific situation. You will also want to make sure that you do a good job at keeping track of your mileage each year. This is very critical and aligns with our earlier discussion on “staying organized”. There are many different high-quality mileage tracking apps, and we recommend that you make the effort in using one.
Deductions For “Gym Equipment, Training Tools, and Gear”:
This is a very important one, as gym equipment is critical to your ability to serve your clients. Because of that, you are able to take tax deductions for any purchase of gym equipment, training tools, and gear. This would only apply during the current tax year for which you purchased the equipment. This could apply to gym mats, dumbbells, a squat rack, kettlebells, etc.
It is important to note for items that are larger and more expensive, you may want to consider “depreciating” them on your tax return. This is different than simply writing it off as a tax deduction. This could apply to equipment such as a treadmill, rower, ski erg, or spin bike.
Deductions For “Running Your Business”:
Even though most self-employed personal trainers focus their time on training their clients in-person, there will always be time spent on “working on the business”. This is the reality of any entrepreneur.
This could apply to so many different things, such as computer-related expenses, internet use, apps, computer software, website-related expenses, marketing, etc. This list can get quite long, especially as it is becoming much more common to not only train clients in-person, but also to train clients virtually or provide other digital services.
Deductions For “Home Office Expenses”:
If you strictly utilize a room or a clearly defined space in your home to work on business-related items, you may be able to get a deduction. This may not apply to every self-employed personal trainer, but if it does, make sure to take advantage of it.
The IRS can be a stickler with this one. Therefore, it is important to have clear records and make sure that you are not mixing business use with personal use in this space. If you are able to get this home office deduction, you will have to decide on using the “regular” or “simplified” method of deduction.
Deductions For “Training, Conferences, & Continuing Education”:
As a Personal Trainer, it is important that you are continuing to grow your knowledge. This will allow you to serve your clients better and evolve as the industry changes. You may grow your expertise through providers like Functional Movement Systems, Functional Range Systems, National Strength And Conditioning Association, StrongFirst, Precision Nutrition, etc.
Doing this is critical to your success as a self-employed personal trainer. Because of that, you can deduct these expenses.
Deductions For “Retirement Plan Contributions, Health Insurance, & Disability Insurance”:
This is a very important one from the perspective of financial life planning. While we always want to optimize our money for living the life that we want today, we need to prepare for an unexpected future.
You will certainly have to pay for private health insurance if you are a self-employed personal trainer. This will be especially true if you are single or if your spouse/partner does not have an employer-covered health insurance plan. If you are self-employed, you can actually deduct the cost of your health insurance premium on your tax return. This is also the case for any premium cost associated with a private disability insurance policy.
When you are self-employed, you will not have an employer-sponsored retirement plan like a 401(k). This is not the end of the world because you can still contribute to other retirement plans. For self-employed personal trainers, you will want to look into Traditional IRA’s, Roth IRA’s, SEP IRA’s, SIMPLE IRA’s, or owner-only 401(k)’s.
All of these types of retirement accounts are very different, but at a bare minimum, you may want to consider contributing to a Traditional IRA to receive a tax deduction.
All Other Deductions For Self-Employed Personal Trainers
The deductions that we have focused on above just scratch the surface. There are plenty more expenses that you can write off, providing you with more tax benefits for self-employed personal trainers.
Some of these may include professional services, entertainment & meals, internet & cell phone, the Qualified Business Income (QBI) deduction, start-up costs, music & streaming services, scheduling & payment software, etc.
Proactive Tax Planning For Self-Employed Personal Trainers
The true tax benefits for self-employed personal trainers really come into play when you proactively plan for what is ahead. This means being aware of how your business is trending from an income tax perspective before 12/31.
This will be a piece of cake if you are staying organized (as we have recommended). The key is to take inventory of your P & L Statement in the Fall (October or November) of each year. You will have a better idea of how much you may pay in taxes come 4/15 of the following year.
It is much easier to do this when working with a competent tax professional. However, if you are good with numbers, you may be able to get a sense of the actions that you could do before 12/31. If you successfully do this, you can save money on taxes.
As an example, if you know that your income is going to be very high, you may want to consider pulling forward any large expenses that you were planning to make in the following year. This would lower your Net Profit and thus decrease your taxable income.
This is just one example. As you get used to doing this, the fun planning starts when you consider retirement plan funding and charitable giving.
The most important tips from this article come down to being organized and proactive when it comes to taxes. When you do this, you will be able to take advantage of the tax code.
Nobody really ever wants to worry about taxes. However, as a self-employed personal trainer, you want to keep as much money in your pocket as possible.
Be smart, stay organized, and live proactively!
Finally, all of the tips noted in this article are just that. For the real work, make sure that you educate yourself and seek professional advice.
Additional Reads & Resources
Personal Trainer Tax Deductions from A to Z
Tax Tips For Self-Employed Personal Trainers
Top Tax Deductions For Personal Trainers
10 Common Tax Deductions For Fitness Businesses
NFPT – Personal Trainer Tax Advice
11 Personal Finance Tips For Personal Trainers That Are Self-Employed
Year-End Tax Tips For Personal Trainers That Are Self-Employed
For more resources, you can always visit our “Resources” page.