A Simple Breakdown of How Income Taxes Work for Bakers

Let’s talk about income taxes — without the panic, confusion, or accountant-level jargon.

I’m about to walk you through a very simple view of how income taxes work for bakers (and really, any small business). Once you see it laid out this way, things start to feel a lot more manageable.

Step 1: Start With Your Income

First, your income for the year is tallied up.

• When you work a traditional job, this shows up on a W-2 or similar form

• When you own a business, we’re looking at your total revenue

Revenue is simply the money your business brought in before anything is subtracted.

This is where write-offs fit in. Write-offs are any expense that is completely or partially allocated to your business.

By subtracting write-off expenses from your revenue, you're able to offset your income and tax liability. 

In order to do this, you need to have a transaction log of all your expenses from from Jan. 1st to Dec. 31st of that year, and then categorize them so that you can allocate them accordingly as business expense write-offs.

Step 2: Subtract Deductions

Next, you subtract deductions.

Deductions are specific, qualifying expenses that help lower your taxable income. You generally have two options:

• Standard deduction – a flat amount you can subtract

• Itemized deductions – used if your qualifying expenses are higher than the standard deduction

After deductions are subtracted from your income, you’re left with something called your AGI.

Step 3: Understand Your AGI (Adjusted Gross Income)

Your AGI (Adjusted Gross Income) is a big deal.

This number is what:

• Determines your tax bracket

• Gets multiplied by the tax rate

In general, a higher AGI means a higher tax bracket — which means more taxes owed.

Step 4: Subtract Credits

Once taxes are calculated, you subtract credits.

Credits are powerful because they reduce your tax bill dollar for dollar.

Some common tax credits include:

• Children

• Education

• Energy improvements (like solar panels)

After credits are applied:

• A positive number means you owe money

• A negative number means a refund (you paid in too much)

Where You Have the Most Control: Write-Offs

When you use tax software, a lot of this process feels like checking boxes:

• Yes, I have this

• No, I don’t

• Click, click, next

But the area where you have the most control is right under your revenue:
👉 write-offs

What Are Write-Offs?

Write-offs are expenses you can fully or partially allocate to your business to help offset your income and lower your tax liability.

Important note:
The goal is not to spend more than you make.

The goal is to allocate everyday costs you’re already paying to your business where allowed.

Examples may include:

• Utilities

• Phone bills

• Meals

• Travel

• Supplies

• Portions of home expenses (when applicable)

For bakers especially, these everyday expenses add up quickly — and when tracked properly, they can make a meaningful difference in what you owe.

The Big Picture

If you’re a baker, my goal is to help you:

• Lower your tax liability

• Maximize your refund

• Feel confident instead of overwhelmed

You don’t need to be a tax expert — you just need to understand how the pieces fit together.

Don’t leave money on the table this year.
A little clarity goes a long way.

If reading this made you realize you’ve been guessing your way through tax season, you don’t have to keep doing it alone.

Let's Take It Further Together 👇🏼

Inside Bake Money, Keep Money, I walk you step-by-step through how taxes work for bakers, how to track and apply write-offs properly, and how to plan ahead so April doesn’t feel like a panic attack. You’ll leave with clarity, confidence, and a system that actually makes sense.

Stop fearing tax season — start understanding it.

👉 Join the course and take control of your numbers.