When I started writing this article, I knew that a lot of fitness business owners were already familiar with the concept of tax deductions. As a fitness business owner, you are probably aware of how deductions work, your taxable income is decreased and thus your overall tax liability goes down as well. By the same token, you have also heard from your accountant about the ordinary and necessary business expense deductions. While the lines between what is considered ordinary and necessary and what is not might be blurred, what is not blurred is the fact that if you show the IRS a lot of income then your tax liability will increase as well. Consequently, it is your responsibility to make sure that you take advantage of every single deduction out there to keep more money in your pocket. If your strategic accountant is not telling you about all the deductions that are available to you, then you need to fire he or she and hire a new one.
I used to be a regular at a brick-and-mortar gym a few years ago, and I ended up becoming friends with the owner of the gym. Due to confidentiality and privacy related reasons, I will call this person Tim. Tim was truly passionate about everything fitness and working out, heck the guy loved sharing tips and advice on how to up your lifting game. As a fitness business owner, you probably share a lot of traits that Tim had. He had purchased the gym only a few months before I joined, and I am not exaggerating when I state that this was truly one of the best athletic facilities that I had discovered. Time used to tell me how his marketing had catapulted the gym from having only a few members to having a few hundred. Nevertheless, what Tim did share with me was the fact that he struggled with hiring the right accountant to handle his books. Tim was a number driven person, but by numbers I mean he really wanted to grow his membership and reach as many people as possible. Tim was not too concerned with the balance sheet, income statement or the statement of cash flows. I do not blame him, why should he be concerned with something that is not his expertise?
Well after one year Tim’s brick and mortar gym was no longer there, I was shell-shocked and could not believe what had just happened. The gym that I loved and treated as my second home was no longer there. Apparently due to lack of liquidity and problems being heavily leveraged ended up costing him his business. We have all heard the old saying, if your business is in a loss and you cannot pay yourself or your employees then it is no longer a business, it’s a hobby. Since the day that Tim made the decision to shut his gym down due to lack of profitability, I made it my mission to help brick and mortar fitness business owners somehow or other. It is critical for you as a fitness business owner to get a tight hold of your finances, especially when it comes to tax time. Here are just some of key deductions that you can take advantage of as a fitness business owner:
1. Credit card and convenience fees incurred during the regular course of business.
2. Cost of educating and getting your trainers certified (ACSM, NASM, ACE certifications are all qualified deductions)
3. Expenses that you may incur when purchasing a franchise gym or trademarking your fitness business logo (included in the attorney fees)
4. Government license fees that you pay on an annual basis to operate your facility.
5. Research and Development costs that you incur in the early stages of your business.
In addition, one of the most important business expense deductions that you are going to need to know about is the cost of purchasing equipment. Yes, any equipment that you purchased for your gym is deductible. This includes racks, benches, yoga mats, kettlebells, etc. In addition, let us say that you purchased 10 laptops for your employees and each laptop cost $2,000 dollars. Under the De Minimis Safety Harbor Rule, you can go ahead and deduct the cost of each laptop, that is a whopping savings of $10,000. Additionally, employee discounts that you offer to your employees on t-shirts, protein shakes/bars and drinks are deductible as well. Your job is to grow your fitness business, my job is to help you make it a reality.