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11/16/2006 03:04:42 PM · #1 |
Hmm, I see this topic come up now and then and thought it would be good for another discussion.
Photography is not my job. However, I am in more than just passing talks with a gallery to sell my stuff. I don't think, however, it will start by the end of the year.
On one hand, I'm not looking for an audit. On the other hand, this year has a bunch of expenses I could deduct toward my photography endeavors. The 5D, the 24-105L, Photoshop CS, Genuine Fractals (not bought yet). While I do take family pictures with the camera, they are probably less than 10% of my total clicks at the end of the day.
So are there opinions as to whether to declare a business this year with no profit (well, I could claim the $12 from DPChallenge) and take the $5000 deduction? Next year, if all goes well, I will make some money at this.
Message edited by author 2006-11-16 15:05:28.
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11/16/2006 03:14:43 PM · #2 |
| I would be interested in this as well. I have not made money this year but the wife had 1 sale and she has no other job so technically she made all her money from photography and if we could deduct the 5d,30d,lens, strobes and website and various other things that would be great. |
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11/16/2006 03:19:52 PM · #3 |
We'll let other weigh in here, but if I have garnered stuff from other threads, it would be this.
you need to be able to prove:
a) you aren't just using all the stuff for personal use.
and
b) you made an effort in your business.
I'd hope to be able to show the emails between the gallery and myself as proof I'm out there "selling" myself and the # of shots I take vs. family shots as proof of non-personal use.
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11/16/2006 03:24:17 PM · #4 |
As far as I remember you also have to actually show a profit within a 3 out of 5 year window, or need to pay back anything that you claimed as a deduction prior to that. You can also look into hobby losses, which lets you write off any profits you make, against the cost of equipment, up to a small amount. Isn't a deduction, but means you can earn and not pay, in some circumstances.
I'm not a tax lawyer. Speak to one if you want real advice.
Message edited by author 2006-11-16 15:25:14.
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11/16/2006 03:28:57 PM · #5 |
Originally posted by DrAchoo:
We'll let other weigh in here, but if I have garnered stuff from other threads, it would be this.
you need to be able to prove:
a) you aren't just using all the stuff for personal use.
and
b) you made an effort in your business.
I'd hope to be able to show the emails between the gallery and myself as proof I'm out there "selling" myself and the # of shots I take vs. family shots as proof of non-personal use. |
makes sense. I have my own website so hopefully that shows I have tried and crysatal has had 1 portrait shoot already and lining more up this year. most of the photos of our family are of the artistic type so I think we would be good there. |
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11/16/2006 03:34:37 PM · #6 |
It does look like you are right in the hobby vs. business Gordon.
If you have a "hobby" you can deduct expenses, but only up to the amount you make.
If you have a "business" you can deduct expenses and count them as losses.
I'm investigating the "three year profit" thing. It looks, on a quick look, that if you show a profit in 3 year of 5 the IRS counts you as a business, but that may be in regards to NOT counting you as a hobby.
I'll keep reading.
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11/16/2006 03:38:42 PM · #7 |
I highly recommend you check out the self-help legal books available from Nolo Press -- they have books* on running a business, IP law/copyright, taxes, and just about everything else you need to know in order to do it right. Some libraries may have their books as well.
*and software and forms |
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11/16/2006 04:03:30 PM · #8 |
Thanks Paul, I'll check it out.
I found this link to be helpful...
When your hobby becomes a business
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11/16/2006 04:09:30 PM · #9 |
Originally posted by GeneralE:
I highly recommend you check out the self-help legal books available from Nolo Press -- they have books* on running a business, IP law/copyright, taxes, and just about everything else you need to know in order to do it right. Some libraries may have their books as well. |
i strongly second this. i've been freelancing for over a year and these nolo books have the BEST information of any resource i've read. and i've read a lot.
:) |
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11/16/2006 04:59:15 PM · #10 |
Originally posted by GeneralE:
I highly recommend you check out the self-help legal books available from Nolo Press -- they have books* on running a business, IP law/copyright, taxes, and just about everything else you need to know in order to do it right. Some libraries may have their books as well.
*and software and forms |
You recommend them so often, I'm beginning to think you own stock in NOLO.
;-) |
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11/16/2006 06:39:28 PM · #11 |
| Also, if I recall correctly, the Bush tax cuts that were enacted in 2001 now allow small businesses to deduct up to $10,000.00 in start-up capital costs as opposed to depreciating them over a number of years. I'd double-check to see if this is still in effect. If not, you'll most likely have to capitalize your cameras, lenses, and other equipment and depreciate them over several (maybe 5 or 15) years. |
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11/16/2006 06:50:06 PM · #12 |
Originally posted by Spazmo99:
Originally posted by GeneralE:
I highly recommend you check out the self-help legal books available from Nolo Press -- they have books* on running a business, IP law/copyright, taxes, and just about everything else you need to know in order to do it right. Some libraries may have their books as well.
*and software and forms |
You recommend them so often, I'm beginning to think you own stock in NOLO.
;-) |
I wish ... they just happen to have the best books on the subject and the easiest-to-remember URL around ... : )
in fact, it's almost as easy as the IRS |
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11/16/2006 07:08:55 PM · #13 |
Originally posted by argyle:
Also, if I recall correctly, the Bush tax cuts that were enacted in 2001 now allow small businesses to deduct up to $10,000.00 in start-up capital costs as opposed to depreciating them over a number of years. I'd double-check to see if this is still in effect. If not, you'll most likely have to capitalize your cameras, lenses, and other equipment and depreciate them over several (maybe 5 or 15) years. |
I believe you are referring to Section 179 which still exist.
Section 179 Publication 946
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11/16/2006 07:25:37 PM · #14 |
One thing to keep in mind. If your equipment is owned by your business, then you will have a heck of a time getting it inexpensively insured. All the threads about having terrific insurance coverage don't apply when your equipment is for business use. (You can search.)
I have to self insure all my equipment; my homeowners policy, which has a rider to cover my home business, will not cover my equipment outside of the home. I checked into other insurance companies too and could not find any low cost insurance for my camera, lenses, and computer, while "in the field" or traveling.
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11/16/2006 07:50:59 PM · #15 |
Hmm, thanks Neil because I do have an extra rider on my equipement. I will take that into consideration.
Scarbrd gave me some advice that I don't have to necessarily "go pro" this year to take advantage of the deductible. I could wait until next year when I start making money (hopefully) and then sell the equipment to my business.
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11/16/2006 09:11:09 PM · #16 |
Originally posted by nshapiro:
One thing to keep in mind. If your equipment is owned by your business, then you will have a heck of a time getting it inexpensively insured. All the threads about having terrific insurance coverage don't apply when your equipment is for business use. (You can search.)
I have to self insure all my equipment; my homeowners policy, which has a rider to cover my home business, will not cover my equipment outside of the home. I checked into other insurance companies too and could not find any low cost insurance for my camera, lenses, and computer, while "in the field" or traveling. |
Have you checked with Hill and Usher ?. They have an insurance policy specifically for photographers. Insurance is just another overhead expense you have to account for when setting up your business. I hope you have professional liability insurance as well. |
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11/16/2006 09:55:53 PM · #17 |
Originally posted by DrAchoo:
Hmm, thanks Neil because I do have an extra rider on my equipement. I will take that into consideration.
Scarbrd gave me some advice that I don't have to necessarily "go pro" this year to take advantage of the deductible. I could wait until next year when I start making money (hopefully) and then sell the equipment to my business. |
Another way to go would be to declare your equipment purchases and amortize them over 7 years (I think photography equipment is amortized over 7 years). Use strait-line, or whatever gives you the least deduction this year, and then deduct against your "hobby" income next year.
Doc, according to your profile, you are an Allergist/Immunologist. Do you need to take pictures for work? perhaps a record of skin reactions to allergy shots, or some allergic reaction? Do you use any of the pictures you take as marketing material (birthday cards, reminder cards, calenders, business cards, etc)? Talk to a tax expert--there may be some way to use your photos in your work. As a guess, can you sell a picture to your business? This could be for marketing or it could just be to hang on the waiting room wall.
Message edited by author 2006-11-16 22:00:34. |
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11/16/2006 10:16:37 PM · #18 |
Originally posted by hankk:
Doc, according to your profile, you are an Allergist/Immunologist. Do you need to take pictures for work? perhaps a record of skin reactions to allergy shots, or some allergic reaction? Do you use any of the pictures you take as marketing material (birthday cards, reminder cards, calenders, business cards, etc)? Talk to a tax expert--there may be some way to use your photos in your work. As a guess, can you sell a picture to your business? This could be for marketing or it could just be to hang on the waiting room wall. |
These are some really good ideas, but I think they almost necessitate taking the highlighted step, as these are all perfectly legitimate tax-reducing strategies which will probably send up skyrockets if not red flags ... if you are going to try and save more than about $500 I'd say hire a pro to handle it for you, and if less, then I'd just forget it for another year.
Of course, the fact that I have to have a serious talk with those folks myself may color my advice just a teensy bit ... : ) |
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11/16/2006 10:20:02 PM · #19 |
Originally posted by hankk:
Doc, according to your profile, you are an Allergist/Immunologist. Do you need to take pictures for work? perhaps a record of skin reactions to allergy shots, or some allergic reaction? Do you use any of the pictures you take as marketing material (birthday cards, reminder cards, calenders, business cards, etc)? Talk to a tax expert--there may be some way to use your photos in your work. As a guess, can you sell a picture to your business? This could be for marketing or it could just be to hang on the waiting room wall. |
The problem there is my equipment would be used for this purpose <1% of the time. I don't think that would fly. It crossed my mind, but I discarded it for this reason.
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11/16/2006 10:20:58 PM · #20 |
Originally posted by Spazmo99:
I hope you have professional liability insurance as well. |
I'm not quite sure that's necessary for a nature/landscape photographer...
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11/17/2006 12:53:50 AM · #21 |
I've gone over most all of this with my CPA last year and this year.
You never have to make a profit, ever. Who says you have to be a good businessman, the IRS? You have to be able to prove you're trying to make a go of it - spending on advertising is one way, getting schooling, joining PPA or WPPI, having biz insurance, etc.
My CPA recomends expensing as much off as possible - whole cameras if need be, are not a problem he tells me. He is not a fan of depreciation for assets that don't last 5 years (cameras get depreciated over 5 years - great for lenses maybe, not bodies IMO). Remember, if you buy it for $2000 you can write off $400/year, but if you sell it in say year 3 the remainder of the write off is gone. Will your $2000 camera be worth $800 in 3 years? This also significantly complicates the bookkeeping.
There are alternatives - my bank will buy whatever you need and lease it back to you - no depreciation, just a simple monthly expense. Not sure the full cost effectiveness of this, but they do it - a friend opened a coffee shop this way - all the fixtures, signage, tables, etc are leased from the bank. One big benefit is he had no large upfront expenditure to make to buy it all.
Insurance: lots of companies offer business liability, but there are SOOO many other options out there (business continuance, income, fair hiring, cash on site/location, accounts recievables, auto, workmans comp, theft by an employee, sexual harrassment, discrimination, and more.)
$1 to $2 million liability are the most common amounts, with all sorts of other possibilities on the other stuff. $350 for that and $200 for $15,000 in equipment - i've talked to 5 or 6 different companies and $550-600 is the premium all want, but what you get varies. Marsh, Hill and Usher, WEDj.com, Zurich and a few more - I think Zurich had the best overall business insurance (and they're the only ones that don't require an item by item inventory of insured items like bodies, lenses, flash, etc and had the lowest deductible), but Hill and Usher had the most oddball photographer oriented (coverage for equipment failure and lost images, will restage a wedding to get the pics again, etc)
Some will pay to rent equipment if yours is stolen or fails, some will hire a replacement, some will pay you and your employees, some will replace your computer or sample prints, etc, and some don't. Remember, if it's used for business your homeowner's won't pay - so if your sewer backs up and your basement floods and you lose 5 framed prints, 3 wedding albums, 2 lights, a couple of backdrops, and your inventory of paper for your printer you want it covered!
It's bloody complicated!
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11/17/2006 12:57:30 AM · #22 |
Originally posted by DrAchoo:
Originally posted by Spazmo99:
I hope you have professional liability insurance as well. |
I'm not quite sure that's necessary for a nature/landscape photographer... |
You stepped on an endangered species of ivy setting up your tripod, and I'm suing!
You have a tent at a craft sale and Jane Customer trips and falls in your tent...
Little johnny pulls over a stand of prints and hurts his wittle hand...mom sees the $2500 30x40 framed print you have on display and gets grand ideas about how much the pain and suffering of little Johnny is worth in dollars and sense.
I buy that 30x40 from you and you deliver it, and I say you scratched my floor/credenza/door/wall when you brought it in.
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11/17/2006 01:05:50 AM · #23 |
Originally posted by Prof_Fate:
Originally posted by DrAchoo:
Originally posted by Spazmo99:
I hope you have professional liability insurance as well. |
I'm not quite sure that's necessary for a nature/landscape photographer... |
You stepped on an endangered species of ivy setting up your tripod, and I'm suing!
You have a tent at a craft sale and Jane Customer trips and falls in your tent...
Little johnny pulls over a stand of prints and hurts his wittle hand...mom sees the $2500 30x40 framed print you have on display and gets grand ideas about how much the pain and suffering of little Johnny is worth in dollars and sense.
I buy that 30x40 from you and you deliver it, and I say you scratched my floor/credenza/door/wall when you brought it in. |
Good thing that:
a) I have small feet.
b) I'm not selling pictures in a tent.
c) Everybody knowns Johnny's mom is a bitch anyway.
d) I can offer some allergy skin tests for free as compensation.
Sometimes you just gotta live on the edge...
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11/17/2006 01:15:37 AM · #24 |
It's called many things...insane, risky, stupid, gambling, or self-insured.
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11/17/2006 04:53:31 AM · #25 |
You DEFINITELY need liability insurance if you go pro. There's no way around it. Once you are a pro, your standard homeowners liability won't cover you for anything you do as a photographer, which means one stupid little accident and you can be financially destroyed. It's one reason I am NOT currently a "pro": I can't afford the insurance based on any realistic expectation I have for sales of prints.
R. |
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