If you earn income primarily from the fitness industry, 2020 can seem like a daunting year where your career was turned on its side. It was a year where being nimble, flexible and able to pivot was paramount.
However, I would not count 2020 out as such a terrible year for fitpros. There are certain strategies that opened up for you in 2020 that you can take advantage of to ease the effects of he economic downturn and pandemic:
(1) The S Corp election - While not unique to 2020, the S election is a great tool to save in Federal self-employment taxes. Having an S Corp also enables you to put yourself on payroll and to have an accountable plan, which is described below.
(2) Accountable plan - The accountable plan is a fancy word for expense reimbursement policy. This allows you to deduct as a business expense certain combined personal and business spending, like a portion of your home (let's say a garage you use for virtual classes and training) along with a portion of utilities or your cell phone bill. Instead of deducting the business portion on your tax return, you can actually reimburse the business portion directly and avoid risks of taking the home office deduction. This is considered an expense to the business but not income to you personally.
(3) Writing off tech - If you purchased new lighting, cameras, or other equipment for your home including exercise equipment, you can write those off as a business expense. Pay attention to the amount because if it is over $2,500 for an individual piece of equipment, you may have to depreciate it.
(4) Charitable donations - Under the CARES Act, you can deduct up to $300 of charitable contributions to qualifying organizations even if you are not itemizing your deductions. That means that those classes you taught for charity would probably count as tax deductions, so make sure you have the donations receipts and confirmations.
(5) Continuing education - If you took some time this year to brush up on your skills, acquire a new certification, or expand your skills in business and marketing, you may be able to deduct these costs as business expenses.
Note: Any business expense deductions must be ordinary and necessary in the course of business. The above examples are for illustrative purposes and may not apply to all. Please consult your accountant prior to implementing these strategies.