If you own a salon and you’re looking for ways to reduce your tax bill, hiring an apprentice might be a smart move. Not only can you train a future employee and provide them with valuable skills, but you can also take advantage of some tax benefits that come with having an apprentice in your salon.

In this blog post, we’ll explain what tax benefits you may be eligible for, what requirements you need to meet, and how to claim them on your tax return. Let’s get started!

What Tax Benefits Can You Get with an Apprentice in Your Salon?

Depending on your employment status and the type of apprenticeship program, you may be able to claim the following tax benefits:

  • A deduction for the cost of training and supplies for your apprentice. As long as they are ordinary and necessary business expenses, you can deduct the cost of providing training, tools, equipment, uniforms, and other supplies to your apprentice. This can help you lower your taxable income and save money on taxes.
  • A credit for the wages paid to your apprentice. If your apprentice is enrolled in a qualified apprenticeship program that meets certain criteria, such as being registered with the Department of Labor or a state agency, you may be eligible for a credit of up to $5,000 per year for the wages paid to your apprentice. This can help you offset the cost of hiring and retaining your apprentice.
  • A credit for the tuition and related expenses for yourself, your spouse, or a dependent. If you are taking professional training to further your career as a stylist or barber, you may be able to claim the Lifetime Learning Credit. This credit can be up to $2,000 per tax return and can cover the tuition and fees for any eligible course at an eligible educational institution. This can help you improve your skills and knowledge and increase your earning potential.


What Requirements Do You Need to Meet to Claim These Tax Benefits?

To claim these tax benefits, you need to meet some requirements and keep records of your expenses and the details of the apprenticeship program. Here are some of the main requirements you need to be aware of:

  • You must be the employer of the apprentice. You cannot claim these tax benefits if you are an independent contractor or a self-employed individual. You must have an employer-employee relationship with the apprentice and report their wages on Form W-2.
  • The apprentice must be enrolled in a qualified apprenticeship program. To qualify for the credit for the wages paid to your apprentice, the apprentice must be enrolled in a program that is registered with the Department of Labor or a state agency, and that provides structured on-the-job training and classroom instruction. The program must also last at least six months and lead to a recognized credential or certificate.
  • The training must be related to your trade or business. To qualify for the deduction for the cost of training and supplies for your apprentice, the training must be related to your trade or business as a stylist or barber. You cannot deduct the cost of training that is personal or that prepares the apprentice for a different trade or businessAd.
  • The course must be eligible for the Lifetime Learning Credit. To qualify for the credit for the tuition and related expenses for yourself, your spouse, or a dependent, the course must be eligible for the Lifetime Learning Credit. This means that the course must be offered by an eligible educational institution, such as a college, university, or vocational school, and that the course must be taken to acquire or improve your job skills. You cannot claim the credit for courses that are for personal enrichment or that are not related to your trade or business.


How to Claim These Tax Benefits on Your Tax Return?

To claim these tax benefits on your tax return, you will need to fill out the appropriate forms and schedules and attach them to your Form 1040. Here are some of the forms and schedules you will need to use:

  • Form 8864, Credit for Employer-Provided Apprenticeship Program. This is the form you will use to claim the credit for the wages paid to your apprentice. You will need to provide information about the apprenticeship program, such as the name, address, and registration number, and the wages paid to your apprentice, such as the name, social security number, and amount. You will also need to attach a copy of the certificate of completion or credential issued to your apprentice by the program.
  • Schedule C, Profit or Loss from Business. This is the schedule you will use to claim the deduction for the cost of training and supplies for your apprentice. You will need to report your income and expenses from your salon business, including the cost of providing training, tools, equipment, uniforms, and other supplies to your apprentice. You will also need to attach receipts, invoices, or other documents to support your expensesAd.
  • Form 8863, Education Credits. This is the form you will use to claim the Lifetime Learning Credit for the tuition and related expenses for yourself, your spouse, or a dependent. You will need to provide information about the eligible educational institution, such as the name, address, and employer identification number, and the tuition and fees paid for the eligible course. You will also need to attach a copy of Form 1098-T, Tuition Statement, issued by the institution.


For more information on how to claim these tax benefits, you can visit the IRS website or consult a tax professional.

Conclusion

Hiring an apprentice in your salon can be a great way to train a future employee, provide them with valuable skills, and take advantage of some tax benefits. By following the requirements and keeping records of your expenses and the details of the apprenticeship program, you can claim a deduction for the cost of training and supplies, a credit for the wages paid, and a credit for the tuition and related expenses. This can help you save money on taxes and grow your salon business.

We hope you found this blog post helpful and informative. If you have any questions or comments, please feel free to leave them below. And if you’re looking for more tips and advice on how to run a successful salon, don’t forget to subscribe to our newsletter and follow us on social media. Thanks for reading!

Kristen Ray Whitfield resides in Gig Harbor, Washington, finding joy in embracing the wonders of nature alongside her family, often indulging in camping trips and weekends filled with surfing adventures. Armed with a degree in operations management, she excels in streamlining processes and enhancing systems for efficiency. With previous managerial roles in salon settings, Kristen gained invaluable insights into customer service, quality control, and regulatory compliance. Her passion lies in fostering vibrant cultures within workplaces and communities, enriching the lives of others through her dedication to creating and sustaining positive environments.

Kristen Whitfield Business Development Manager @ Atarashii Apprentice Program