Have you ever asked yourself “Can I write this off?” or “Is this a business expense?”
The IRS has a boring definition for a business expense. They say it has to be both “ordinary” and “necessary.” That means the expense is common for Box owners, and it is helpful and appropriate for your specific gym.
The way to think about it is if you are spending a dollar, you should ask yourself the question, “Is this related to my business in any way possible?” If the answer is yes, then it is likely a business expense and you should be paying for it out of your business account.
Now let’s talk some specifics:
Most business owners are not allowed to write off their personal groceries. While you are not allowed to write off 100 percent of your groceries, you are allowed to write off the premium you pay for the healthy food compared to what the normal food costs. How can you even justify expensing these? Would you ever join a gym or hire a trainer who looks out of shape? That’s why. As the gym owner, you have a certain physical appearance that is expected of you. If you don’t match the image of your stereotype, your membership numbers will suffer. Likely taxes saved? $500.
Make every trip you take a justifiable business expense. The tax code says a travel day is “Any day you are sleeping away from your home for a business reason.” As long as more than half your travel days are considered business days, than you can deduct the cost of your trip. A business day is when you conduct business or meet with someone for a “bona fide” business reason, regardless of how long the “business” stuff lasts. Well call me crazy, but isn’t CrossFit global now? You know, not all Affiliates do things the same way. So a perfect business purpose is to visit another gym to see how they do things. Go through a workout with their Coaches, see how they onboard their new athletes, grab a hot chocolate with the business owner and talk shop. All are valid reasons to make the trip a business expense. And maybe you are just going to an area to see if you want to open a new gym. Boom! Tax deduction! Likely taxes saved? $500.
You should be having regular company meetings in order to work “on” the important aspects of your gym instead of always just working “in” your gym. Large corporations often rent out hotels or convention centers to hold these company meetings. You should be doing the same thing, except you can rent your house to the business instead of paying these hotels and convention centers for their space. There is this tax rule nicknamed “the 14 day rule.” The 14-day rule basically says if you have a real-estate property, and you rent it out for more than 14-days during the year, the property is now a rental asset and you need to claim rental income on it. What this also means is if you rent a real estate property for less than 14-days per year, you do not have to claim any rental income.
So, the small business as an entity contracts with the business owner — a.k.a. you — to utilize your living space one day per month to hold its board meetings and other company meetings. The company pays rent to the owner for the one-day use. That is a rent expense on the business. The owner does not claim rental income on that amount received. Likely taxes saved? $3,000.