Tax Deductions for Sales People
Being a salesperson means you may receive commissions as much as your regular salary. In that case, you may be classified as a statutory employee, which will be marked in Box 13 of your Form W-2, Wage and Tax Statement. If you are a statutory employee, you'll have to report your income on a Schedule C. Generally, statutory employees are those:
- Who work full time selling life-insurance
- Who drive for an agency or for commission
- Who are traveling sales representatives
- Who sell from their residence
If you receive income from sources outside your regular employment, it may be considered self-employment income, which is subject to self-employment tax over $400 of net earnings.
You may be able to deduct any expenses you incurred as an employee. You'll need to claim the unreimbursed expenses as a 2% limited miscellaneous itemized deduction, and you should keep the receipts to substantiate the expenses. Some expenses that can be deducted include:
- Trade journals or publication subscriptions
- Union dues or professional association fees
- Protection from liability insurance
- Any equipment or tools replaced within one year
- Uniform costs, provided they are required and not suitable for everyday attire.
- Any licensing fees, from the state or local government, as long as not paid for the first license.
- Car and truck expenses if used for business purposes.
- Traveling expenses for business trips, provided you are away longer than the average day's work (can either use actual expense deduction or standard deduction)
If you take work-related training courses, you may be able to deduct expenses if they meet certain qualifications. The classes can't help you qualify for a new job, or help you meet the minimum qualifications for your current job. Refresher courses, vocational classes, and those on the latest developments usually qualify.
Self-employed sales representatives can deduct additional expenses on a Schedule C. Some of these include:
- Bad business debts
- Employee salaries or other commissions you pay
- Any fees incurred for legal or professional services
- Rental expenses for property used by the business
- Advertising costs
- Repair and maintenance fees for equipment
- Supplies necessary and ordinary to run the business
- Excise taxes and personal taxes imposed
