6 Tax-Saving Strategies Every Sales Rep Should Know
As most sales reps are already aware, taxes can be the bane of your existence while selling. As a commissioned sales rep, you are technically a small business owner, and can take advantage of the tax code if you plan efficiently and effectively. Here are some of the most common tax strategies for sales reps in 2025:
1. Per Diem, Meals, and Lodging Expenses
If your sales role requires travel away from your tax home, you may be eligible to deduct meals and lodging expenses. This applies to trips that are less than one year in duration and not considered a permanent relocation. This means you maintain a tax home in another location and have a clear intent to return upon completing the temporary assignment.
A. Per Diem Method
Instead of tracking every receipt, eligible self-employed sales reps can use the “per diem” method. This allows you to deduct a fixed daily amount for meals and incidental expenses incurred while traveling overnight for business purposes. Lodging expenses must be the actual amounts spent on lodging, not per diem.
Key points:
* Must be traveling away from your tax home overnight (at a minimum).
* Per diem rates vary by location (GSA Per Diem Rates).
B. Actual Lodging
You can also deduct the actual costs of your lodging, but not use the per diem rates. Keeping clean documentation is critical in order to provide documentation in an audit.
2. Vehicle Expenses: Mileage vs. Actual Costs & Bonus Depreciation
Your vehicle is often one of your largest business expenses. These methods make sure you get the largest write-off possible.
A. Standard Mileage Method
This method allows you to deduct a set rate per business mile driven. It is currently 70 cents per mile in 2025, and will increase to 72.5 cents per mile. This method is simple to track, but may not result in the largest possible deduction.
B. Actual Expense Method
With this method, you deduct the business portion of common expenses like gas, insurance, repairs, and depreciation.
C. Bonus Depreciation
If you purchase (cash or financed) a vehicle that qualifies (over 6,000 lbs) and use the actual expense method, bonus depreciation can allow you to deduct all of the vehicle’s cost in the first year.
3. Retirement Accounts: IRAs, SEP IRAs, and Solo 401(k)s
Retirement accounts allow you to avoid taxes now (usually) and save for the future.
A. Traditional & Roth IRAs
Traditional and Roth IRAs are simple to open and easy to manage. They are limited to $7,000 in contributions per year for 2025, and will increase to $7,500 for 2026. A traditional IRA creates a deduction now, but taxes are paid when the money is taken out. A Roth IRA doesn’t result in a current deduction, but it will be tax-free upon withdrawal, including the growth. A traditional account is better for those who are paying higher taxes than they will in retirement and those who are older. A Roth IRA is better for those who are younger and paying lower taxes than they will in retirement.
B. SEP IRA
A SEP IRA allows self-employed sales reps to contribute a percentage of their net income with relatively high limits. The maximum is limited to the lower of 20% of net income or $70,000.
C. Solo 401(k)
This is often the most powerful option for high-earning sales reps. It allows you to contribute from both the business and the personal side. So for S Corps, this is usually a good route. Can contribute up to $23,500 from the employee side and up to 25% of total compensation as profit sharing from the business side. This is also capped at $70,000.
4. Self-Employed Health Insurance & HSA Plans
A. Health insurance is one of the largest expenses for self-employed individuals. If you qualify, you can deduct health insurance premiums for yourself, your spouse, and your dependents. This deduction is taken above-the-line, reducing adjusted gross income (AGI). If your spouse is eligible for employer-sponsored coverage, you are not able to take this deduction.
B. Health Savings Accounts (HSAs)
When paired with a qualifying high-deductible health plan (HDHP), contributions are tax-deductible, growth is tax-free, and withdrawals for medical expenses are tax-free. This creates a triple tax advantaged account, allowing money to grow and be used 100% tax free. For an individual plan, the limit in 2025 is $4,300. For a family plan it is $8,550.
5. S Corporation Election
Self-employment taxes can really hit hard come tax time. Once your sales income reaches a certain level of profitability, an S Corp election may significantly reduce self-employment taxes. This is done by filing form 2553 with the IRS and state applications (if applicable). You then will pay yourself a reasonable salary on W-2 from your own company. All the profits that are not paid out as a wage will not be subject to FICA taxes and can result in large tax savings.
6. Augusta Rule (Home Rental Strategy)
The Augusta Rule allows you to rent your primary residence to your business for up to 14 days per year tax-free. This is done by holding business meetings in your home and then charging a fair rental rate for that usage. This creates an expense for the business and the income isn’t taxable to you personally.
Conclusion
If you want to discuss these tax strategies with a professional or have any other questions answered, please reach out to us for a free consultation call.
Disclaimer:
The information provided is for educational purposes only and should not be relied upon as tax or legal advice. Always consult a qualified professional before making tax or financial decisions.