New Tax Laws

Calculating and paying taxes as a personal trainer is both expensive and complicated – and even more so after the passing of the Tax Cuts & Jobs Act in December 2017.

In this article, we explore three major ways that this new tax law affects you as an entrepreneurial personal trainer.

1. You may get an increased deduction for equipment purchases.

While this may not be an issue for you if you rent space at a local gym to train your clients, personal trainers who have their own training studio or gym may benefit from the new tax law’s enhanced bonus depreciation rules.

Typically, when you purchase equipment used in your business, the tax code requires that you deduct the cost little-by-little over six years via depreciation. So if you purchase a $1,000 piece of equipment, you could only take a $200 deduction this year. The remaining $800 cost would be deducted a small bit each year over the remaining six years.

This isn’t ideal because you don’t get the full tax benefits of your purchase until six years from now!

The Tax Cuts & Jobs Act, however, expanded the “bonus” depreciation previous such that – if you prefer – you can deduct 100% of your equipment purchases all in the year of purchase.

So if you’ve been thinking about making some upgrades to your studio, now may be a good time.

2. You may qualify for the new pass-through deduction.

The Tax Cuts & Jobs Act allows a never-before-seen deduction known as the pass-through deduction, which is simply a deduction equal to 20% of your business income.

So if you netted $100,000 in your personal trainer business last year, after expenses, you may be eligible to take a deduction of $20,000, meaning you only pay taxes on $80,000 of income.

Sounds great, right? Well, like most tax benefits the IRS gives taxpayers, there’s a catch: if you’re single and your taxable income is at least $157,500, or you’re married and file jointly with your spouse and your taxable income is at least $315,000, you may not be able to take the full deduction, so be sure to check with your tax professional!

3. You may want to rethink how you structure your business for tax purposes.

When you’re an employee of a company or anyone other than yourself, your tax situation is simple in that you are only subject to the regular income tax. This is the tax that incorporates the infamous tax brackets.

When you’re a business owner, any additional income you generate is not only subject to regular income tax, but also to the self-employment tax. However, there are strategies that self-employed personal trainers like you can implement to reduce their self-employment tax.

One strategy is to form a business entity and elect for it to be treated as an S corporation or a C corporation. Of course, remaining as a sole proprietor could very well lead to the best tax answer as well – it really depends on your tax situation.

You or your tax professional may have analyzed your business years ago and determined what your ideal tax treatment was – sole proprietorship, S corporation, or C corporation – and you’ve likely stuck with it since then.

However, the Tax Cuts & Jobs Act threw a wrench in this analysis for several businesses because it drastically changed the tax regime for C corporations. While C corporations were previously subjected to tax brackets ranging between 15% and 39%, the new tax law set the C corporation tax rate at a flat 21%. 

This is all to say that if it’s been a while since you’ve considered how you are treating your personal trainer business for tax purposes, you may want to take another look this year due to the changes brought about by the new tax law.

More References and Resources

5 Personal Trainer Tax Questions Answered

Tax Planning for Personal Trainers: Getting Organized

Tax Planning for Personal Trainers: Estimated Payments

Tax Deductions for Personal Trainers

Tracking Mileage for Personal Trainer Tax Deductions

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About the Author

Guest Author Logan AllecLogan Allec is a CPA and owner of the personal finance blog Money Done Right. After spending nearly 10 years helping big businesses save money in his role as a tax adviser, he launched Money Done Right with a mission to help everybody — from college students to retirees  — make more money, save more money and grow more money. Residing in the Los Angeles area with his wife Caroline, he enjoys hiking, basketball and board games.