TooziNewly licensed cosmetologist? Your first-year money checklist.
Updated
Your first year as a cosmetologist decides how much of every service you keep. Pick how you'll be paid (commission, booth or suite rent, or your own salon), open a separate account, and set aside roughly 15 to 20% of your profit for taxes if you're paid on a 1099. Shears, dryers and your kit come off your taxes when you start using them on clients, and up to $5,000 of what you spent getting the business ready before your first client comes off in year one as a startup cost.
Your first-year checklist
- Decide how you’ll be paid. Commission (W-2), booth or suite rent (1099), or your own shop. It changes who pays your taxes and who buys the supplies. The table below compares them.
- Open a separate business account and card the week you start. Every client payment in, every supply run out. It makes every write-off provable and your profit obvious.
- Keep your cosmetology license current. Renewal fees and continuing education after you’re licensed are write-offs.
- Register the business if you rent a booth or open a shop: your city or county business license, and a seller’s permit if you’ll sell product. An LLC is optional for one person; it doesn’t change your federal taxes.
- Get liability insurance before your first client in a booth or your own space.
- Set money aside from every payment if you’re on a 1099. See the table below for how much.
- Track every cost from day one, including what you bought before your first client. Those pre-opening costs are your startup deduction.
Commission, booth rent or your own shop
| Commission (W-2) | Booth or suite rent (1099) | Your own shop | |
|---|---|---|---|
| Taxes | Taken out of each paycheck | You set aside and pay quarterly | You set aside and pay quarterly |
| Social Security and Medicare | You pay half (7.65%), the shop pays half | You pay both halves: 15.3% on 92.35% of profit | Same as booth rent |
| Tools and supplies | Usually the shop’s; yours aren’t deductible on a W-2 | Yours, and deductible | Yours, and deductible |
| Rent | None | Booth or suite rent, deductible | Lease, buildout, utilities, deductible |
| Paperwork | A W-2 in January | Schedule C and Schedule SE | Schedule C, plus payroll if you hire |
Weighing a booth? Put your real week into the booth renter take-home calculator, or the 1099 vs W-2 calculator to compare against a commission offer.
The startup cost deduction
What you spend getting the business ready before your first paying client is a startup cost: registering the business, your website and booking page, pre-opening flyers and ads, scouting booths or suites, and your first state license fee if you pay it before you open. You can deduct up to $5,000 of it in your first year. The rest is spread over 15 years (180 months). If your startup costs top $50,000, the $5,000 shrinks dollar for dollar.
Equipment isn’t a startup cost. Your shears, dryers, irons, a styling chair and your school kit are deducted when you start using them on clients: items up to $2,500 each can come off right away, and bigger ones can too with a Section 179 election. Bringing your school kit with you? It counts as business equipment from the day you start using it on paying clients, at the lower of what you paid or what it’s worth now.
What you can and can’t write off in year one
- Booth, chair or suite rent
- Shears, dryers, irons, a styling chair and your school kit
- Color, developer, foils, gloves, capes and back-bar product
- Cosmetology license renewals and continuing education
- Liability insurance, booking apps and card fees
- The business share of your phone
- Pre-opening startup costs, up to $5,000
- Cosmetology school tuition and exam prep (they qualified you for the trade)
- Your own hair, nails and lashes
- Street clothes, even all-black salon wear
- Driving from home to the salon you work at every day
The full trade list is on taxes for hairstylists, and the suite money checklist covers renting your first suite.
How much to set aside your first year
On a 1099 nobody withholds for you. Federal only, single filer, no other income, 2026:
| Profit for the year | SE tax | Income tax | Set aside | Per week (48 weeks) |
|---|---|---|---|---|
| $20,000 | $2,826 | $249 | 15% | about $64 |
| $30,000 | $4,239 | $1,178 | 18% | about $113 |
| $45,000 | $6,358 | $2,838 | 20% | about $192 |
Add your state’s rate on top. Profit is what’s left after rent and supplies, not what clients paid you. Your own number: the set-aside calculator.
Start your first year with the books already done.
Text Toozi every cut, every supply run, every rent payment. It tracks your startup costs, tells you what to set aside from each payment, and texts you before each due date. 14 days free, no card.
- 14 days free
- No card to start
- Cancel by text
- IRS e-file authorized
Questions
Can I deduct cosmetology school tuition?
Generally no. Education that qualifies you for a new trade isn't deductible, and school is what qualified you for your cosmetology license. Continuing education after you're working is deductible, because it maintains or improves skills in the business you already have.
What is the startup cost deduction?
Costs you pay to get the business ready before your first paying client (business registration, pre-opening advertising, a website, scouting booth or suite locations) can be deducted up to $5,000 in your first year. Above $50,000 of startup costs that $5,000 shrinks dollar for dollar, and whatever isn't deducted is spread over 15 years. Equipment like clippers or a chair isn't a startup cost; it's deducted when you start using it for clients.
Do I have to pay quarterly taxes my first year?
If you owed no federal income tax last year (common if you were in school), you can't be charged the underpayment penalty this year. The tax itself is still due by April, so set money aside from every payment anyway. From year two, quarterly payments are due April 15, June 15, September 15 and January 15.
I'm on commission at a shop. Do I need to do anything?
If you get a W-2, taxes come out of your paycheck and the shop pays half of your Social Security and Medicare. Keep your pay stubs and your tips. If they pay you on a 1099 instead, you're self-employed: you set aside tax yourself, pay quarterly, and deduct your own tools and supplies.
Tax is a doozy.
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