Being self-employed as a travel agent has many tax advantages. Many people do not realize the financial benefits of being an independent contractor, such as a home-based travel agent, versus working for someone else. Why not let the IRS pay for the necessary components of your work—a passport, Internet service, CLIA and IATAN license? These and many more items are all deductible on your yearly or quarterly tax return.
Think about this for a minute: the IRS wants people to be self-employed. Why? Because then they have to pay self-employment tax on what they claim as income. And of course, the IRS does not tell you what you can write off as deductions to lower your "self employed income," therefore paying more to them than you may have to.
So wouldn't it be nice if you knew what you could deduct to lower your income and pay less taxes to the IRS? It would be impossible to provide a complete list of everything in this short article, as a lot of different scenarios come into play when you're self-employed.
For example, do you own your home, or rent? Do you own a car, or lease one? Do you have other people working for you at home, and if so, are they your immediate family?
These plus many more questions should make you start thinking, and more importantly, your tax preparer should ask you these questions so that you can get the most money back form the IRS and pay as little as possible in self-employed taxes.
Many readers may be seasoned travel agents/independent contractors and may already know the tax basics. But for those just getting started in the business, get off on the right foot, start saving receipts and deduct what you are entitled to. Some helpful tips follow. —Denise Kralowski
10 MOST BASIC DEDUCTIONS FOR HOME-BASED AGENTS
1. License, Start-up and Memberships Fees
Any fees paid to renew a license to such organizations as CLIA and IATAN, and any annual fees to an agency you work independently for, are all 100 percent deductible.
2. Meetings, Seminars, Training, Conventions
Such as CTO, GITP and APTA are again 100 percent deductible.
Note that this includes business cards, flyers, brochures (if you pay for them) and printing jobs, as well as pens, calenders, etc., with your business' name printed on them.
4. Books/Directories/Magazine Subscriptions
Some agents purchase books to use as resources at home such as the Moffitt Guide and the Travel Agency Directory. Also, subscriptions to magazines are tax deductible.
5. Cell Phone/Home Phone
If you purchased a cell phone for the sole purpose of being a travel agent and you need it, then you can deduct the cost of the phone along with the monthly charges. If you already had the cell phone and use it for other purposes as well, then only deduct the portion of the monthly fee based on the percentage you use it for travel business (your tax preparer will know how to do this). You cannot deduct the main line to your home.
6. Internet Service
Without a doubt, home-based agents need the Internet to conduct business, therefore the monthly fee for Internet service is tax deductible.
7. Office Supplies
Too many people get "office supplies" mixed up with "supplies." These are two different categories that should be separated on your tax return. Office supplies mean just that—supplies needed to run your home office: computer paper, pens, ink cartridges, folders, envelopes, etc.
Different than "office supplies." Items that one would consider supplies usually are gifts or office supplies that are depreciated items. Depreciated items would include your computer, office furniture, computer software, fax machine. Even though these are office supplies, they depreciate over several years, so they are again listed in a category by themselves. As a tax preparer, however, I would rarely use this category for home-based travel agents.
When I ask my clients for their postage amount, I sometimes see blank looks on their faces. But we mail travel documents to clients, or thank you notes after they travel, so why not let the IRS pay for the stamps? Deduct the postage on your tax return.
Keep a calendar or mileage log and keep track of every time you drive for a reason that is related to your travel business, such as going to buy office supplies, or going to the post office to mail your documents, or to the airport because you are going on a fam trip. This mileage is tax deductible. —DK