 David A. Bliss |
Studio equipment and tax right offs I had Mark Feldstein in mind for this question because he seems to have a lot of very useful knowledge about running a studio, but of course anyone can answer! ;-) I was wondering if any of the equipment I purchased this year can be used as a tax deduction. Specifically, strobes, stands, and backdrops. I understand that the responders are probably not tax consultants, so I will not be using anything posted here as gospel and then coming after you for a wrong answer. ;-) I just want to get pointed in the right direction. Thanks!!
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Jon Close |
Check with a tax accountant. Generally, such expenses can only be deducted from revenue generated from a photography business. If you are a part-timer or photography is a sideline, you cannot deduct such expenses from your "day job" income. Also, because they are "capital expenses" with a long useful lifetime, you may be required to amortize the cost rather than deduct it all in one year.
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Michael H. Cothran |
Yes, as long as you file as a business, and can prove during an audit that you are actually in business, and not just a hobby. In that case, all of the equipment you mentioned could be used as business deductions. Note - There is a break in equipment cost, where if the item's cost to you is under this amount you would deduct the full price you paid as a one-time expense. If it is over this amount, the item would be depreciated over a 5-year span. I don't know what that amount is, but an accountant could tell you. Michael H. Cothran
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Deb James |
Yes, check with an accountant. The rules may vary state to state, but here in Colorado you can indeed write off the cost of that equipment as a business expense. We formed an LLC a couple of years ago for our screen printing and embroidery business. Our accountant advised us that we could write off all of our equipment expenses the first year or we could drag it out over five years. We chose the former which made for a very nice return as it was a substantial amount of write off. Again, check with an accountant. The advice will be worth it's weight in gold and you'll love the help at tax time!
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Mark Feldstein |
Well David, it's an accounting question not a legal one and I'm with Jon in that you ought to talk to an accountant who has the latest scoop on these issues. Still, if your primary occupation involves work in the photographic industry, if your expenses are related to that occupation, then sure, they're deductible. But read on. Generally, when someone declares additional income from a secondary source, say from a separate business and even if it's in the start-up stages (over a period of 3 years, I believe), the IRS allows you to take deductions for any reasonable and necessary expenses connected with that secondary business. Whether you amortize as the equipment depreciates, (as Jon mentioned) or take a straight out deduction for that particular tax year is also another question for an accountant (not necessarily a CPA btw) and the answer is based on your particular tax/income situation. My own preference is to take the whole write-off for expensed items of $5,000 or less for that tax year and not depreciate them just in case the IRS changes the rules in the subsequent tax year. The other thing to bear in mind is that the IRS only allows you to deduct expenses (and losses) associated with a secondary income or business adventure for 3 years (as I recall), before they determine that it's not a business but a hobby and stop allowing the deductions related to it. So, in that respect, it might behouve you to take the straight out equipment deduction at once rather than over years. It also depends on the amount for a particular piece of equipment. Again, the phrase "reasonable and necessary expense" as defined in the tax code, can mean a lot of different things depending on a lot of different things including the type of business. That includes how the item relates to the nature of the business. For example, can a photographer successfully deduct the purchase of an elephant including its care and feeding as a (legitimate reasonable and necessary) perhaps if you're a wildlife photographer or need the elephant to pose kids on or hold family members at bay. LOL !!! Could be. But for a commercial photographer who specializes in shooting glassware and actually has no need for elephants, then probably not. Nonetheless, as my own accountant would say, "[When in doubt...deduct"]. ;>) But as a lawyer/CPA he promises to intervene and defend my returns if necessary. That's the kind of "stand-up" accountant I want doing my own returns. Meanwhile, take it light, but see what an accountant says. If you do, let me know what they think too.
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David A. Bliss |
Thanks everyone for the responses! I knew I would have to talk to an accountant, but I really didn't want to go into it blind. I am the type of person that likes to get an idea first. I will keep you posted on how it works out. I don't think I want to take all of it as a deduction this year, since I didn't make much with photography, so maybe depreciation is a better move for me. I'll have to see what an accountant says! Next year is when I will be moving forward with photography as a career, instead of an expensive hobby that doesn't pay for itself. I have a two year plan laid out, with the goal to be "self employed" at the end of the two years.
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Mark Feldstein |
BTW David, the primary controlling law is federal tax law and that's the same all over the states. But states with state income tax, like California, etc., may have rules that don't quite follow the federal counterpart. I think that's what Deb was getting at. M.
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