Can I File Taxes if I Do Hair From Home?
Learn how to file taxes as a home-based hairstylist, including income reporting, deductions, and tax obligations for self-employed professionals.
Earning money from styling hair at home comes with tax responsibilities. Whether it’s a full-time business or a side hustle, the IRS requires all income to be reported. Failing to do so can lead to penalties and missed deductions that could lower your tax bill.
Understanding how to classify your work, track expenses, and report earnings correctly is key to avoiding issues when filing taxes.
Business Classification Options
How you classify your hair business affects tax filing, deductions, and legal responsibilities. Most home-based hairstylists operate as sole proprietors, meaning there’s no legal separation between personal and business finances. This setup is simple and requires filing a Schedule C (Form 1040) to report income and expenses. However, it also means personal assets could be at risk if legal issues arise.
Some stylists register as a Limited Liability Company (LLC) to separate personal and business liabilities. While an LLC doesn’t change tax filing unless an election is made, it offers legal protection. If the business grows, electing S Corporation (S Corp) status may reduce self-employment taxes by allowing earnings to be split between salary and distributions, with only the salary subject to self-employment tax. To do this, Form 2553 must be filed with the IRS, and payroll records must be maintained.
Home Office Expense Deductions
Running a hair business from home allows for deductions that reduce taxable income. The IRS permits a deduction for the portion of a home used exclusively and regularly for business. A stylist using a spare room solely for client appointments qualifies, but a shared living space does not.
The deduction can be calculated using the simplified or regular method. The simplified option allows a flat $5 per square foot, up to 300 square feet, for a maximum deduction of $1,500. The regular method requires calculating actual expenses—such as rent, mortgage interest, utilities, and property taxes—then applying the percentage of the home used for business. If a stylist’s workspace takes up 10% of their home, then 10% of eligible expenses can be deducted.
Other costs, like internet service, insurance, and maintenance, may also be partially deductible. Modifications such as a shampoo station or additional electrical outlets may qualify as business improvements, which can be depreciated over time rather than deducted in full in the year incurred.
Self-Employment Taxes
Independent hairstylists must pay self-employment taxes, which cover Social Security and Medicare. Unlike traditional employees, who split these taxes with an employer, self-employed individuals pay the full amount. For 2024, the self-employment tax rate is 15.3%—12.4% for Social Security (on earnings up to $168,600) and 2.9% for Medicare. Income exceeding $200,000 for single filers or $250,000 for married couples filing jointly is subject to an additional 0.9% Medicare surtax.
Since these taxes aren’t automatically withheld, self-employed individuals must make estimated quarterly payments using Form 1040-ES, due in April, June, September, and January of the following year. Underpaying can result in penalties. Many stylists set aside 25-30% of earnings for taxes and use prior-year income as a baseline for estimating payments.
Self-employment taxes can be reduced by deducting the employer-equivalent portion, which is 50% of the total amount paid. This deduction is taken on Form 1040 and lowers taxable income but does not reduce the actual self-employment tax owed. Contributing to a retirement plan like a SEP IRA or Solo 401(k) can also lower taxable income by allowing pre-tax contributions.
Reportable Tips and Income
All income from hairstyling services, including direct payments and tips, must be reported to the IRS. Even cash payments or transactions through digital platforms like Venmo, Cash App, or Zelle are taxable. Starting in 2024, third-party payment processors must issue Form 1099-K to individuals receiving over $5,000 in total transactions. However, even if a stylist doesn’t meet this threshold, all income must still be reported.
Tips, whether in cash or added to electronic payments, are subject to income tax and, in most cases, self-employment tax. While salon employees have their tips reported on W-2 forms, independent stylists must track and report them voluntarily. The IRS recommends keeping a daily log of all tips received, which can be recorded in a ledger or bookkeeping software.
Documentation Requirements
Accurate record-keeping is essential for hairstylists working from home to comply with tax laws and maximize deductions. The IRS requires self-employed individuals to maintain documentation of income, expenses, and any supporting materials for tax filings. Without proper records, deductions may be disallowed in an audit, and unreported income could result in penalties and interest charges.
Income records should include invoices, receipts, bank statements, and payment processor reports. For cash payments, a written log with dates, amounts, and client names can serve as proof of income. Expense tracking should cover business-related purchases such as styling products, tools, advertising, and professional development courses. Receipts and bank statements should be categorized and stored for at least three years, though the IRS can audit returns up to six years later in cases of substantial underreporting.
Mileage logs are necessary if a stylist travels for business purposes, such as purchasing supplies or attending industry events. The IRS allows a deduction for business mileage, which is 67 cents per mile for 2024. A detailed log should include the date, purpose, starting and ending locations, and total miles driven. Digital apps can simplify this process by automatically tracking trips and generating reports.