Tax Deductions/Write offs

sanj

EOS 5D MK IV
Jan 22, 2012
3,483
287
Photographers in the USA: I read in one of the posts in this forum that a professional photographer can claim the entire cost of equipment purchase while doing tax deductions. Is that true? Could you please help me with this? Thanking you in advance.
 

Mt Spokane Photography

I post too Much on Here!!
Mar 25, 2011
15,801
938
Generally, it is not true, but there are complex rules that might let you expense half of it.

You should discuss it with your accountant. I presume that you are asking about expensing the equipment rather than depreciating it. The rules can vary according to the value, and the useful life. I'd doubt that a expensive body and lens can be written off as a expense, the useful life is going to be over 5 years and the cost over $2500. My accountant does not let me expense them, I have to depreciate them, but your situation will determine the answer. I do expense small items like batteries, accessories, memory cards and the like.

Leasing might be a good way to write off your annual cost.

 
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sanj

EOS 5D MK IV
Jan 22, 2012
3,483
287
Generally, it is not true, but there are complex rules that might let you expense half of it.

You should discuss it with your accountant. I presume that you are asking about expensing the equipment rather than depreciating it. The rules can vary according to the value, and the useful life. I'd doubt that a expensive body and lens can be written off as a expense, the useful life is going to be over 5 years and the cost over $2500. My accountant does not let me expense them, I have to depreciate them, but your situation will determine the answer. I do expense small items like batteries, accessories, memory cards and the like.

Leasing might be a good way to write off your annual cost.

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Thank you!!!
 

privatebydesign

Would you take advice from a cartoons stuffed toy?
Jan 29, 2011
8,422
1,910
120
As Mt Spokane says speak to a good accountant. When I moved to the USA I interviewed accountants they pretty much all do free initial consultations. It can be complicated if like me you are a resident non citizen with bank accounts and earnings in other countries so make sure your accountant is fully aware of all that and tells you the implications for your individual situation.

Having said that I offset every cent I spend on photography against my USA based photography business, mostly as per year expenses but some depreciated over time as capital expenses. Be advised if you have a business, even a simple pass through as all mine are, if you buy equipment and write it off to that business the business technically owns it not you. So if you were to stop the business you personally would have to either sell the capital equipment to close the books or buy it yourself with your personal money.
 
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Bennymiata

EOS 6D MK II
Here in Australia, the government has allowed small businesses to write off up to $150k on new equipment purchases in this financial year, to incentivise business to spend up to improve the economy.
However, sales of cars and trucks, as well as consumer goods are in free-fall.
 

unfocused

EOS 1D MK II
Jul 20, 2010
5,469
2,311
66
Springfield, IL
www.mgordoncommunications.com
I'll echo the advice of others to talk to an accountant. Actually, the article Mt. Spokane linked to is pretty good at providing an overview and is consistent with my own experience.

Between the time I retired from my original career and when I went back to work as an employee for my current employer (now semi-retired and working part time), I established a sole proprietorship for my photography and writing contractual work.

First thing to understand, and something that many barstool experts on this forum fail to comprehend, is that everything you deduct, whether it is as an expense or as depreciation on large purchases, only reduces the amount you declare as profit and the taxes on that profit.

Let's say, for example, you have $3,000 in expenses and another $3,000 in depreciation. That doesn't mean you get to take $6,000 off your taxes. That should be obvious, but you'd be surprised at how many people who aren't in business for themselves, don't get that. Instead that $6,000 reduces your taxable income. If you had income of $60,000 the expenses and depreciation could reduce your taxable income to $54,000. In other words, your actual savings would be the taxes that you would have owed on that $6,000.

It's really quite a simple concept if you stop and think about it. That $6,000 that you spent came right off the profits that you earned. You never saw that profit and the government isn't going to tax you for something you never received. Let's say you are in a 15% tax bracket. The $6,000 in expenses and depreciation, will save you $900 on the taxes you owe. Understand that's greatly simplifying things and using random numbers and percentages, but I hope you'll get the idea.

One additional thing to consider is that once you make the decision to declare an item as a business expense, you are strictly limited in how much you can use it for personal purposes. Not going to get into details, but essentially you have to reduce your deductions to take into account personal use and if personal use is too high, you may not be able to deduct anything.

I still have my sole proprietorship and I still deduct a few small business expenses that are directly related to my freelance work. But I don't even bother trying to amortize any equipment because it's just too complicated and the benefits are too insignificant for me.

One final note: I welcome corrections from anyone who actually knows what they are talking about. I tend to err on the side of caution when it comes to taxes because it just isn't worth the risk to me to push the envelope for very little gain.
 

stevelee

FT-QL
Jul 6, 2017
1,477
422
Davidson, NC
People should also be aware that there are hobby income rules that differ from business rules. If you would regularly show a loss on a proper Schedule C, it would be hard to convince the IRS that you are in business. After 3 years of losses they might be inclined to consider it a hobby. I don't know the latest rules, though, so check the IRS web site and/or your accountant.

Back when I took in a little money from photography and web site work (which I would lump together as one business), I didn't bother to report the income, since the loss on Schedule C wouldn't be deductible anyway. In that period, I didn't take in enough to cover my Adobe subscription. Fifteen or so years ago when there really was some side income, I got at least one 1099 and filed Schedule C.

YMMV, and whatever the circumstances, I'm just throwing it in so you will be aware. If it is a real business and you intend to make money, then you might need to shift income or expenses into different years, perhaps by depreciating something that you could otherwise expense.

If it's really just a hobby, then follow those rules.

This is intended as a heads up, and not legal or financial advice.
 

FamilyGuy

EOS T7i
Feb 5, 2020
67
83
Photographers in the USA: I read in one of the posts in this forum that a professional photographer can claim the entire cost of equipment purchase while doing tax deductions. Is that true? Could you please help me with this? Thanking you in advance.
You'll want to ask your accountant about Section 179, which allows you to write off the entire depreciable value of the asset (cost less salvage value) in the year in which it is acquired.

https://www.irs.gov/newsroom/irs-is...168g-depreciation-under-tax-cuts-and-jobs-act

"The Section 179 deduction applies to tangible personal property such as machinery and equipment purchased for use in a trade or business, and if the taxpayer elects, qualified real property."

Effectively permitting direct expensing of the acquisition of capital assets.

Several reasons a business might do this. If you had higher than normal income during a particular year and purchased equipment as a result. If you’re an S-Corp taxed personally on pass through income, rather than paying the higher tax rate (assuming a higher bracket), write off capital purchases now before your income normalizes next year.
 
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sanj

EOS 5D MK IV
Jan 22, 2012
3,483
287
You'll want to ask your accountant about Section 179, which allows you to write off the entire depreciable value of the asset (cost less salvage value) in the year in which it is acquired.

https://www.irs.gov/newsroom/irs-is...168g-depreciation-under-tax-cuts-and-jobs-act

"The Section 179 deduction applies to tangible personal property such as machinery and equipment purchased for use in a trade or business, and if the taxpayer elects, qualified real property."

Effectively permitting direct expensing of the acquisition of capital assets.

Several reasons a business might do this. If you had higher than normal income during a particular year and purchased equipment as a result. If you’re an S-Corp taxed personally on pass through income, rather than paying the higher tax rate (assuming a higher bracket), write off capital purchases now before your income normalizes next year.
Wow. Thanks