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Photographer
rp_photo
Posts: 42,470
Houston, Texas, US


Say that Mr. GWC decides one day to become a photographer. He declares himself to be in business and spends $2000 on a new Canon 20D kit.

If he manages to make $2000 (doubtful), then he should have zero taxable income from the business, but if he ends up shooting TFCD's, can he claim a $2000 loss which would reduce taxes on "day job" income?

What are the legal minimum requirement for a photographer to be a considered a business for tax purposes? How much loss could one incur before IRS scruitany would result?
Sep 24 05 03:37 pm  Link  Quote 
Photographer
Columbus Photo
Posts: 2,318
Columbus, Georgia, US


You can't write off your "loss" unless you actually spent $2K on TFP shoots.  And I think that business losses only offset business income.  So it wouldn't affect the income from your day job.

Paul
Sep 24 05 04:13 pm  Link  Quote 
Photographer
Kevin Brian
Posts: 63
Yorba Linda, California, US


rp_photo wrote:
Say that Mr. GWC decides one day to become a photographer. He declares himself to be in business and spends $2000 on a new Canon 20D kit.

If he manages to make $2000 (doubtful), then he should have zero taxable income from the business, but if he ends up shooting TFCD's, can he claim a $2000 loss which would reduce taxes on "day job" income?

What are the legal minimum requirement for a photographer to be a considered a business for tax purposes? How much loss could one incur before IRS scruitany would result?

You CAN write off your camera (and all expenses incurred producing them), if you have a legit business with income FROM that business
(even if it's less than $2,000).
You can save taxes, if your expenses are more than your income in your business...that loss would save you income tax $$ incurred from your other job.

If you don't have it already, I'd recommend you get your business license...business checking acct...etc...etc...FIRST.
AND I'd recommend consulting a tax expert smile

Sep 24 05 04:23 pm  Link  Quote 
Photographer
StMarc
Posts: 2,959
Chicago, Illinois, US


Consult a tax professional.

I will say - and this is NOT legal or professional advice - that under many circumstances an "amateur" photographer *can* deduct camera equipment and other photographic supplies *if* they plan to accept money for photography and make a profit at it at some point.

However, you'd probably have to depreciate the camera, not take it as a lump-sum deduction, depending on its cost and other factors.

M
Sep 24 05 05:23 pm  Link  Quote 
Photographer
Doug Harvey
Posts: 1,055
Las Vegas, Nevada, US


StMarc wrote:
Consult a tax professional.

I will say - and this is NOT legal or professional advice - that under many circumstances an "amateur" photographer *can* deduct camera equipment and other photographic supplies *if* they plan to accept money for photography and make a profit at it at some point.

However, you'd probably have to depreciate the camera, not take it as a lump-sum deduction, depending on its cost and other factors.

M

You will have to depreciate the equipment expense and you can write off all of the other operating expenses (up to a certain percentage).

Sep 24 05 05:39 pm  Link  Quote 
Photographer
Columbus Photo
Posts: 2,318
Columbus, Georgia, US


You don't have to depreciate any camera I'd be able to afford.  I  believe the number is $10K now.

Paul
Sep 24 05 07:17 pm  Link  Quote 
Photographer
Merlinpix
Posts: 7,096
Farmingdale, New York, US


Get thee to an accountant! < business type that is>.

My accountant is a god: travel, equipment, supplies , etc all get their due deductions. I do get 1099's from publishers, some years  I make a profit, others I show a loss, but in general I'm ahead.

I would recommend you at least have a DBA, before you try to write stuff off.

Paul
Sep 25 05 06:59 am  Link  Quote 
Photographer
dissolvegirl
Posts: 297
Northampton, Massachusetts, US


How much does a godlike accountant go for these days?
Sep 25 05 08:04 am  Link  Quote 
Photographer
Merlinpix
Posts: 7,096
Farmingdale, New York, US


dissolvegirl wrote:
How much does a godlike accountant go for these days?

Funny you should ask, my account does my personal and business taxes  ( file yearly with an LLC) for around $100. He says it's mostly plug in to tax programs and the entry takes a few minutes. The trick being know what can, and can't be deducted, and which for what expense.

Paul

Sep 29 05 12:11 am  Link  Quote 
Photographer
Scott Aitken
Posts: 3,587
Seattle, Washington, US


You can't write off the theoretical value of a TFP, although you CAN write off actual expenses (like the costs of the prints, film, consumables like batteries, etc). You can write off your equipment as business expense as long as you sell some photos/images, even if you don't make an actual profit. The IRS will not let you operate a business at a loss indefinitely. At some point, you must show a profit or stop claiming it as a business (I don't remember the time frame they use... I think it is either 3 or 5 years).
Sep 29 05 12:13 pm  Link  Quote 
Photographer
OrlandoGlamour
Posts: 177
Orlando, Florida, US


Quick replies / thoughts...

(1)  The "take it all at once in one year" expense depreciation limit (Section 179) is $21,000.00 per year.  This doesn't mean that one necessarily SHOULD take such a deduction, but it is available (subject to various rules).

(2)  If you are a "cash basis" business (most small businesses are), you cannot deduct the "costs" of TFP that aren't actual money-paid-out costs.  For example, you CAN deduct the cost of film, processing, prints, etc, but CANNOT deduct a "charge" for your time (ie: I normally would charge $75/hour, so I wanna deduct $750.00 for 10 hours of TFP work).  The same goes for contributions of time to charities, but it's a good idea to do some of that anyhow!

(3)  The "guideline" for profitability is making a profit 3 years out of 5.  This is a generalization & over-simplification, but gives one an idea of how IRS views a "real" business intent.  There are exceptions to the rule, on both sides.

(4)  It is a good idea to speak with a tax advisor to get a good starting point for your business.  If you want to handle things on your own, things will be MUCH easier if the foundation was set from the start rather than trying to re-create a whole year of records later.

Disclaimer:  Although my business includes tax preparation / accounting / payroll / etc., this obviously isn't specific advice given for any specific person or issue.  (Sorry... Too many lawyers, too little time & too much money to fight when such a line is forgotten!).


...jmh
Joseph M. Hillebrandt
jmh@cbsorlando.net

Central Business Solutions, Inc.
AccuTax of Central Florida,
Magical Images Photography!
Sep 29 05 12:41 pm  Link  Quote 
Photographer
Joshua Gottesman
Posts: 431
Las Vegas, Nevada, US


Merlinpix wrote:

Funny you should ask, my account does my personal and business taxes  ( file yearly with an LLC) for around $100. He says it's mostly plug in to tax programs and the entry takes a few minutes. The trick being know what can, and can't be deducted, and which for what expense.

Paul

I'm a CPA in my day job and I'd never charge as little as $100 for that work.  To me its a value proposition.  The value of those tax returns is a heck of a lot more than $100.  I'm not knocking the guy, if that's a fair price for him, then go for it, I just think he's undercharging for his services.

The idea of going to a CPA is a good one.  You should save much more than the CPA's fees will cost you in the long run, and probably in the short run, too.

Sep 29 05 01:01 pm  Link  Quote 
Photographer
Fotographia Fantastique
Posts: 17,318
Lebanon, New Hampshire, US


*bump*
From last year, because we are approaching the deadline, and Schedule C is driving me nutz!
Apr 11 06 04:08 pm  Link  Quote 
Photographer
Yuriy
Posts: 1,000
Gillette, New Jersey, US


Kevin Brian wrote:
You CAN write off your camera (and all expenses incurred producing them), if you have a legit business with income FROM that business
(even if it's less than $2,000).
You can save taxes, if your expenses are more than your income in your business...that loss would save you income tax $$ incurred from your other job.

If you don't have it already, I'd recommend you get your business license...business checking acct...etc...etc...FIRST.
AND I'd recommend consulting a tax expert smile

A camera IS NOT an expense!
Cameras, lights, computers, etc. are capital purchases (aka "Assets").

You can write off depreciation, supplies that are used, advertising (business cards to billboards), shipping and postage, papers, inks, chemicals (if you use film), etc.

You should consult a CPA to go over this with you.
Also, I would recommend you take a night course in accounting so you can temporarily keep your books until you can hire a bookkeeper.

Apr 11 06 07:27 pm  Link  Quote 
Photographer
First Shot Studios
Posts: 138
Rochester, New York, US


Its not quite that simple.  Your camera, and other photo and business related equipment, are assets, and as such must be depreciated accoring to IRS MACRS tables.  Now of course, any expenses you incur during the year operating your business can be written off.  You must claim any revenue you recieve for your sevices.  You determine taxable income by subtracing expenses and amortized depreciation of your equipment from revenue.  If this # is positive you pay business tax, if it is negative, you claim a loss.  Yes, you can write off a business loss on your personal taxes so long that you are a proprietorship or simple partnership.  LLCs and Corporations do not apply. 

When at all in doubt, seek a qualified accountant.

Patrick
Apr 12 06 09:04 pm  Link  Quote 
Photographer
Kansas City Media Group
Posts: 648
Kansas City, Missouri, US


Yuriy wrote:
A camera IS NOT an expense!
Cameras, lights, computers, etc. are capital purchases (aka "Assets").

snip
You should consult a CPA to go over this with you.

If you "use up" a camera during a year, and purchase a new camera every year, it then becomes an expence..... for most people it probly is an asset!?!? but not always.
You should consult a CPA or tax professional

Have aGreat Day
Charlie

Apr 13 06 04:05 pm  Link  Quote 
Photographer
Just Jay
Posts: 18
Fairfax, Virginia, US


Some things I learned trying to figure this out for this year's taxes...

If you want to claim your gear for depreciation (as far as I can tell, ALL gear is depreciable), you must be able to show profit in 3 out of 5 consecutive years of business.  If your business is less than 5 years old, you can write off your depreciation, but your return WILL be flagged and you should expect to write a statement detailing your business plan and have all receipts for depreciable items.

You CAN make money as a photographer and not have to claim the income as a "small business."  You can claim expenses and income as "hobby-related."

H&R Block's TaxCut software actually uses the Photographer example in great detail in their instructions and help files for determining whether or not you are a small business or a hobbyist.
Apr 13 06 08:57 pm  Link  Quote 
Photographer
Viper Studios
Posts: 1,196
Little Rock, Arkansas, US


Section 179 allows you to take an immdediate deduction as has been previously stated.

So, if I go out and buy a camera, a lens, and some flashes, I can take those under section 179 up to $21,000.00

You avoid the MARCs tables.

However, that simply shelters an equivalent amount of "income".

If you have no "income", you can carry over the loss to other years under the rules.

Whether you can use the "loss" form Schedule C against your daytime income, is something you would have to ask a CPA about.

Mark
Apr 14 06 08:38 am  Link  Quote 
Photographer
Glamour Boulevard
Posts: 8,628
Sacramento, California, US


To those who do know a lot about business taxes. I am just wondering, would gallery submisstion fees(those fees some galleries charge to review your images for an exhibit) tax deductible?
May 01 06 12:01 am  Link  Quote 
Photographer
Paul Grupp
Posts: 4,096
Troy, New York, US


Glamour Boulevard wrote:
To those who do know a lot about business taxes. I am just wondering, would gallery submisstion fees(those fees some galleries charge to review your images for an exhibit) tax deductible?

I'm not an accountant or tax lawyer, and I don't even play one on TV. That being said, assuming that you have already established yourself as a legitimate business in the eyes of the IRS, and the galleries you are submitting to will either provide advertising that leads to sales, or directly lead to sales, than most expenses relating to placing your work in a gallery will be deductable.

On the other hand, if you have never actually placed work in a gallery, they could give you a hard time about the expense if you were ever audited.

That's one man's opinion. . . .

Paul

May 01 06 11:56 am  Link  Quote 
Photographer
C and J Photography
Posts: 1,986
Hauula, Hawaii, US


There is no other viable excuse for paying Gallery submission fees than a business expense. The fact that a Photographer has paid this type of expense during the year acts to legitimize other expenses. The fees are absolutely irrefutably deductable.

If your Accountant says they are and the IRS doesn't challenge them.
May 01 06 12:10 pm  Link  Quote 
Photographer
Paul Grupp
Posts: 4,096
Troy, New York, US


ArtisticDigitalImages wrote:
There is no other viable excuse for paying Gallery submission fees than a business expense. The fact that a Photographer has paid this type of expense during the year acts to legitimize other expenses. The fees are absolutely irrefutably deductable.

If your Accountant says they are and the IRS doesn't challenge them.

Not to nitpick -- but the expenses would only be deductble if you are irrefutably established as a legitimate business. The IRS is always trying to reclassify photographers into the hobby category, so if you are marginally profitable or unprofitable, there is that risk. However, I agree, if you are solidly established, it seems like a legitimate business expense.

May 01 06 12:15 pm  Link  Quote 
Photographer
Glamour Boulevard
Posts: 8,628
Sacramento, California, US


bang bang photo wrote:
That being said, assuming that you have already established yourself as a legitimate business in the eyes of the IRS, and the galleries you are submitting to will either provide advertising that leads to sales, or directly lead to sales, than most expenses relating to placing your work in a gallery will be deductable.

On the other hand, if you have never actually placed work in a gallery, they could give you a hard time about the expense if you were ever audited.

That's one man's opinion. . . .

Paul

I am a legit business and I am in a photography exhibit as we speak.

May 01 06 04:59 pm  Link  Quote 
Photographer
StevenNoreyko
Posts: 235
Austin, Texas, US


rp_photo wrote:
What are the legal minimum requirement for a photographer to be a considered a business for tax purposes? How much loss could one incur before IRS scruitany would result?

There's no hard fast rules here.  If you were to be audited, the only thing you have to prove is an INTENT to make a profit. You could show an operating loss for years, and still have an intent to make a profit.  FWIW - The IRS will look back 7 years at your returns when they do an Audit. If you showed a profit for 4 of those years, that would look favorable towards your business status.

The main thing here is that you need to show the IRS that you ARE a business. Business bank accounts, credit cards, lines of credit, solid record keeping, etc...  That's the stuff that matters - not if you had a profit or loss.

-steve
http://www.stevennoreyko.com/

May 02 06 12:21 am  Link  Quote 
Wardrobe Stylist
Dave the design student
Posts: 45,198
Detroit, Michigan, US


The Section 179 deduction mentioned above is off by about $100,000 and it changes on an annual basis.
Aug 25 07 03:30 am  Link  Quote 
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