The holidays are over and a new year is underway, which means it’s time to prepare for another tax season. If you managed your own dance studio in 2019, make the most of your hard work with the appropriate dance studio tax deductions in 2020. Not sure where to begin when it comes to the dance studio write-offs and tax deductions you qualify for? We have you covered. Read on for the most important potential write-offs to keep in mind as you begin collecting receipts and financial statements for your 2019 taxes.
What Are The Basics Of Dance Studio Owner Tax Deductions?
While we'll discuss some of the common studio deductions in this post, it’s important to talk to a tax professional about your unique circumstances. Your dance studio tax deductions will depend on a variety of factors, such as whether you’ve structured your business as a Limited Liability Company (LLC) or another entity. A tax preparer can guide you through the process and confirm that your taxes are correct.
Beyond that, though, dance studio tax deductions generally fall into a few categories. And, if you’re spending money on something that helps your business operate or grow, it is probably a deductible expense.
The first and best way to capitalize on any potential expenses is to keep a record of all of your purchases for the studio. Every single receipt or financial statement is crucial. Stay organized with a simple filing system using financial software and/or physical binders.
In addition, be vigilant about tracking income. With the right dance studio software you can access financial history to help with annual revenue tracking. It’s also helpful if you can connect with accounting software like Quickbooks for automatic syncing.
We start here because staying organized throughout the year pays off when it comes time to fill out paperwork for the IRS.
12 Potential Dance Studio Tax Deductions
As noted, it's important to work with a tax professional who understands the details of your studio, as each case will be different. However, these are the most common dance studio tax deductions that may apply to you:
- Studio space costs
- Salaries and wages
- Office supplies
- Makeup and costumes
- Dance equipment
- Professional development
- Business gifts
- Charitable donations
Let’s look at these in more detail.
1. Studio space costs
Your studio space is most likely your biggest expense, which makes it an important deduction.
Whether you rent or own your space, this is a large chunk of change that is essential to your business. Keep thorough records of how much you spent throughout the year to save more during tax season.
Your electricity, internet, water, and phone service are all possible dance studio tax deductions.
After all, you couldn’t run your dance studio in the dark! Be sure to keep all of your monthly billing statements.
3. Salaries and wages
The money you pay to full-time, part-time, and even freelance employees are one of the biggest sources of dance studio owner tax deductions.
Plus, keep track of any contributions you make to your employees’ health plans, life insurance, and retirement options.
4. Office supplies
It takes more than a dance teacher and an empty studio to run your business.
For example, you have to keep parents and students informed through mailers and flyers. Your printer, the ink you use, and computer paper are all considered dance studio tax deductions. This category may also include small expenses like pens and paperclips, as well as larger expenses like signage and furniture.
Dance studio software is essential when it comes to keeping your dance studio tuition and finances organized, and it’s also a small business tax deduction.
It’s an investment that helps you keep your business running smoothly. Other technology costs may include costs for actual hardware (like laptops or new monitors), other software you use to manage your business, and hosting fees for your website.
6. Makeup and costumes
When it comes time for recitals and competitions, a lot of money is spent on costumes and makeup. This could actually be an important deduction if you're paying for them.
Even dry cleaning or laundry costs for these items are deductible.
7. Dance equipment
This type of dance equipment often qualifies as a write-off when you file your taxes.
It wouldn’t be a dance studio without music — and a lot of it!
Whether you purchased digital songs or hired a pianist, the cost of music is another potential write-off.
Growing your business is just as important as running it.
From a website to business cards, marketing and advertising costs can add up fast. When considering your dance studio tax deductions in this category, think of any costs for website development, paid digital ads, marketing agency fees, printing, graphic design help, and more.
10. Professional development
As a dance teacher, you know the importance of continuing education. Chances are you probably attended a seminar, conference, or workshops in the last year.
The money you spent to get in the door of those classes, as well as the cost of travel, hotels, and food, may qualify partially or in whole as dance teacher tax deductions.
11. Business gifts
Gifts purchased for your teachers, staff, and students are considered business gifts. The catch? You are generally limited to $25 per recipient in order for this to be deductible.
Incidental costs such as engraving, packing, or shipping aren't included in the $25 limit if they don't add substantial value to the gift.
12. Charitable donations
It’s common for businesses to make charitable donations, especially around the holidays. Perhaps you donated to a non-profit geared towards dance education or therapy, or a local youth group.
Check the status of your charity on the IRS website to make sure your contribution will qualify as a deduction when you file your dance studio taxes. If so, make sure to add a line for this important tax deduction.
Better Financial Insights
If your resolution for 2020 is to get your finances in order, we can help. Studio Director is the key to streamlining the business side of your dance studio.
With Studio Director, you’re always in the know when it comes to the most important aspects of your business. Our software connects to accounting software like Quickbooks for automatic revenue syncing. You have access to a dashboard that allows you to see your financials for any given period of time. Plus, we offer top-notch customer support to answer your questions and solve issues in a timely manner.
Contact us today to learn more about how we can help you improve your dance studio's key business processes!