Here are some tax deductions for event pros, so you can make sure your tax preparer is totally on point.
Taxes are part of the social contract. We work hard for every penny, but we also benefit from the things around us. And taxes, well, they help fund a lot of the things we take for granted. So even though it can be painful to pay up each April or see our wages garnished, taxes are generally a net good.
David, our CEO, is a rockstar accountant and recommends buying separate supplies even if you’re working from home. It just makes everything easier to track when it comes to tax deductions. It’s one thing to calculate the percentage of floor space, but quite another to figure out how many disinfectant wipes went into your business versus family use. In the end, do your utmost to keep personal and business expenses entirely separate at every step.
David’s overall top advice is:
- Keep records (just your standard bookkeeping)
- Always try and pay expenses out from a business account.
What Is Taxable Income?
Just in case, let’s clarify what taxable income is. If you take your total income and minus any tax deductions, then what’s left is taxable income.
Total income – tax deductions = taxable income.
The more you deduct, the smaller your taxable income. And that increases the likelihood of a solid refund if you overpaid during the year. So the purpose of finding deductions is to make sure you’re paying the correct amount of taxes.
I recommend working with an accountant on your taxes and ensuring they agree with your deductions, but you know your event business better than anyone else. It’s up to you to help your accountant help you. And in case you hadn’t thought of every possible deduction, here are some ideas to run past your tax preparer.
1. Home Office
Many event pros work from a home office, even when there isn’t a lockdown. According to the IRS, for your workspace to qualify as a home office, it needs to be:
- In regular and exclusive use.
- The principal place of your business.
The home office business deductions are based on either the percentage of your home used for the business or a simplified square footage calculation (see Simplified Method below). According to Turbotax, “an easier calculation is acceptable if the rooms in your home are all about the same size. In that case, you can figure out the business percentage by dividing the number of rooms used in your business by the total number of rooms in the house.”
Note: If you’re an employee, you likely don’t qualify for a home-office deduction – the rules change, and this is one of the more recently updated tax laws.
2. Internet Fees
Suppose you spend a ton of time online for your work (which is many of us). In that case, you can calculate the number of hours you spend online for work and deduct that percentage of your annual internet provider’s fees.
For example, if you use the internet 8 hours a day and 4 of those hours are for work, you can deduct 50% of your annual internet costs.
3. Basic Utilities
The same thing goes for heating or cooling your home. When working from home, you can calculate the percentage of time spent working and deduct heat and electricity expenses.
Note: if you’re struggling with the calculations overall, there’s a Simplified Method that allows for $5 per square foot of your home office. You might save more money by going through the hassle of calculating everything. Still, I figured it’s worth knowing that there’s a shortcut.
Tax deductions for equipment include work computers, desks, chairs, printers, phones, and anything else you use to get work done. Remember that these are long-term items, and the IRS expects you to make the deductions over time. There are specific rules for different types of equipment as laid out here. It ain’t easy reading, but it’s pretty well defined. And your accountant will have a good idea of what the appropriate depreciation is.
5. Office Supplies
Event professionals use a lot of notebooks, Post-it notes, and printer ink. I mean, that’s why we made our event timelines and task lists into one-click PDFs. The good news is that office supplies are deductible. And this even includes toilet paper and cleaning supplies.
6. Website Costs
As an event pro, you’ve likely got a website. But are you deducting all the relevant costs involved? Make sure you’re including your work email fees (if you pay for work email) as well as hosting costs, SSL certificates, and registrar fees for your domain name.
It’s easy to forget website costs because you might not even know what an SSL certificate is or that you paid for your domain name on a 5-year contract. Often you’ll pay for website items on a multi-year basis. If you’re using a company like GoDaddy, just run through your products and keep a list.
7. Marketing and Ads
Of course, if you’re running social media ads or search engine marketing, which is common in the event space, you’ll be able to deduct those costs from your taxes.
Of course, this applies to any lead generation costs. So if you’re paying for featured listings on the Knot, Wedding Wire, PeerSpace, or wherever, those are tax-deductible too.
8. Event Planning Software
Yes, event planning software is tax-deductible. And because the event software is exclusive for your business, there aren’t any fancy calculations to be made.
But other non-event software can be tax deductions too. But are you using something like Canva for both personal and business? In that case, you might need to calculate the percentages that apply to your event business.
So make sure you consider all the software you might use for your business, from accounting software to design tools like InDesign, Illustrator, or Canva. If it’s a part of your business, it can be a tax deduction.
9. Payment Processing Fees
Whether you use Square or Stripe, or any other invoicing and payment app, that 2.7% fee is a tax deduction for your event business. Pretty cool, right?
And even bank fees for wire transfers are deductible.
10. Contractors, Consultants, And Other Assistance
If you hired a professional marketer, SEO expert, or any other type of contractor, their fees are also deductible. That includes business coaches, accountants, and lawyers.
Similarly, if you took part in a styled shoot and had to pay for the venue or florist, then make sure to include those in your list of tax deductions.
11. Upskilling And Networking
If you took a course, attended a virtual conference, paid for a webinar, or went to any networking events (virtually, of course), then add up those associated fees. Yup, professional development is tax-deductible.
12. Travel Costs
Of course, there wasn’t a whole lot of traveling going on, but even so, you can deduct travel expenses from your taxable income. That includes taxis, hotels, parking fees, gas, baggage, and even dry cleaning if it’s relevant to your work. You can even deduct meals and tips if you traveled outside the general area where you work.
Just don’t get cheeky and deduct lavish personal expenses like a spa treatment or entertainment. Entertainment is only deductible under specific circumstances (like hosting an employee holiday party), so you should check with your accountant.
13. Client Entertainment
Event pros often take their clients out for coffee to talk through planning the big day. Keep the receipts. While many entertainment expenses are not deductible, client entertainment is. Just don’t go overboard.
14. Medical Expenses And Health Insurance
Have you purchased your health insurance through the marketplace, as is common in the event industry? You can deduct those costs from your taxable income.
Many medical and dental expenses are deductible. If you’re self-employed, you may be eligible for the self-employed health insurance deduction. Provided you made a net profit.
15. Event Insurance
As an event pro, you likely have looked at various event planning insurance plans, including:
- Event planning liability insurance
- Event planning professional liability insurance
- Event planning liquor liability insurance
- Hired and non-owned auto insurance
If you have any of these plans, they count as tax deductions.
16. Licensing & Certification
Licensing regulations differ everywhere, but some event pros, like makeup artists, may need to apply for licenses from a state board. But if you live in a state that requires an Esthetician or Cosmetology license or a food safety certification as a caterer, then those costs are tax-deductible.
17. Retirement Savings
This tax deduction isn’t specific for event professionals, but it’s highly recommended. You can make your savings tax deductible if you invest them in an IRA.
18. Charitable Donations
Charitable donations are tax-deductible. That just gives you one more reason to do good in your community and around the world. The charity will need to be a registered non-profit and give you a receipt, of course. And please make sure your kind-heartedness is effective by assessing your charity of choice on a site like Charity Navigator.
19. Self-employment Tax
According to TurboTax, you can claim 50% of what you pay in self-employment tax as an income tax deduction. And since many event pros are freelancers and self-employed, you’ll definitely want to look into this. Smart Asset has an income tax calculator that can help you figure this out. You likely can deduct half of your FICA payments, but please check with your tax preparer to be sure.
I mentioned depreciation in the equipment section above, but I wanted to say this as a reminder. From your car to your computer to your desk, anything you use is tax-deductible – even if you bought it years ago. Depreciation means that items that are used for business over multiple years are still tax-deductible. So are you deducting the costs of older equipment, even if you didn’t buy it in this past tax year?
21. Energy Efficient Homes
Considering how many event pros work from home offices, this tax deduction is a good one to remember. If you’ve made your home energy-efficient, you can qualify for tax credits.
22. Start-up Costs
If you launched your event business in the past year, you could deduct up to $5000, provided you spent less than $50,000 on getting launched. So if you paid for market research, incorporation fees, partner filing fees, consulting fees, etc., before your business was officially up and running, those expenses could be tax-deductible.
23. State and Local Taxes
You can often deduct state and local taxes from your federal taxes, but there are a few rules and limitations on this since 2018. There’s a combined total deduction limit of $10,000, but there’s a lot of politics around this. Some are pushing for the limit to be increased, while others want the deductions to be removed entirely. Check with your tax preparer when you file.
You’ve Earned Those Tax Deductions!
I can’t stress this enough – check with your account professional what deductions are correct for you and your business. This article isn’t to tell you what you can and can’t do when filing your taxes, but rather to give you ideas to discuss with your tax pro. The bottom line is this: take advantage of deductions to save money, and grow your event business. 2021 and 2022 are going to be incredible for the event industry. So make your money work for your business!