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10/18/2006 01:45:33 AM · #1 |
Ok guys here goes.
Been at it for over a year now hard and heavy. I have almost 70,000 pics on my website and dont see it slowing down.
Talking with my accountant...we are depreciating my equipment over a 5 year period.
My question is this.
Do you guys use your equipment till it is completely depreciated..or do you get new each year and consider the amount depreciated as a business expense?
I want to purchase both the 1d Mark IIN and the 1DS Mark II cameras and maybe trade them out each year.
I will probably keep either the 5d or upgrade the 20d to a 30 d for a backup.
Here is an example my accountant gave me.
If I buy a camera for 3500....depreciate over 5 years = 700 per year deduction.
If I sell it after 1 year for 2700...I break even...which is good. Then I buy another and do the same next year.
I plan on shooting as much if not more over the next few years. Business plan not finished yet...but I sure am having fun doing it.
I cant go full time yet.....No way starting out I can replace my daytime income. It will have to be after the business is making money.
Just curious what you guys do for your equipment. I can easily see spending at least 10 grand every year for new equipment.
Thanks,
Barry
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10/18/2006 07:53:35 PM · #2 |
| anybody have input on this? |
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10/18/2006 08:15:58 PM · #3 |
I suppose the question would be if the amount of depreciation exceeds the cost of new. But deductions and depreciations are not in the same category, if I recall. I see lots of tax returns where everything has been depreciated so that the taxpayer's net income is tens of thousands of dollars in the negative. I don't think that deductions work quite the same way.
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10/22/2006 08:23:57 PM · #4 |
Made a deal with my wife. No more personal money contributed to the photo biz...
So I am going to open a new account at the bank. The rules are simple for me to keep from getting divorced.
I get to keep what goes in...and anything that goes out...has to come from this account.
I know it sounds simple...and I probably should have done this from the start..but sometimes we cant see the forest for the trees.
Thanks for the replies guys.
Barry
Will trade two crisp examples of the "KIT LENS" for a 400 2.8 or 1dmk2n |
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10/23/2006 07:53:08 PM · #5 |
Originally posted by karmabreeze:
I suppose the question would be if the amount of depreciation exceeds the cost of new. But deductions and depreciations are not in the same category, if I recall. I see lots of tax returns where everything has been depreciated so that the taxpayer's net income is tens of thousands of dollars in the negative. I don't think that deductions work quite the same way. |
Thought you deducted depreciation (that is, depreciation is a type of deduction).
But as to the OPs question, Getting new equipment every year means you are out of pocket that amount ($700). There are hidden costs, like you may have to get new accessories (like a spare battery) and may have to learn a new user interface on the camera.
If you keep the camera for 5 years and buy a new one at the same price, you own two cameras at the end of 10 years. On the other hand, if you buy and sell every year, if you time your purchase right and hit the Canon tripple rebates, you may make money selling the camera and start a nice lens collection :-)
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10/23/2006 09:06:18 PM · #6 |
Originally posted by hankk:
Originally posted by karmabreeze:
I suppose the question would be if the amount of depreciation exceeds the cost of new. But deductions and depreciations are not in the same category, if I recall. I see lots of tax returns where everything has been depreciated so that the taxpayer's net income is tens of thousands of dollars in the negative. I don't think that deductions work quite the same way. |
Thought you deducted depreciation (that is, depreciation is a type of deduction). |
I think what she's saying is that some business can count depreciation of assets as negative income, which is more significant than a normal deduction (I think) because it change your tax bracket. I could have totally mis-read that.
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10/23/2006 10:53:57 PM · #7 |
check into it with a CPA. There is an amount that you can completely write-off the entire purchase price in one year if it is under a certain amount. Can't remember that amount. By doing that it is a deduction and not depreciation. If you depreciate it and then sell it you will have a capital gain that you should pay taxes on. For a small expenditure (relative for a business) it is better if you can deduct versus depreciate.
This is unofficial, off-the-cuff, free advise. Rember that you get what you pay for. Since this suggestion was free it amounts to just about that much.
Good luck. |
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10/24/2006 11:44:18 AM · #8 |
Originally posted by wavelength:
I think what she's saying is that some business can count depreciation of assets as negative income, which is more significant than a normal deduction (I think) because it change your tax bracket. I could have totally mis-read that. |
Yea, I thought that also and started writing about it, but it got so long and involved that I cut it out. Basically, AFIK, you can deduct business expenses as unreimbursed employee expenses on schedule A or on schedule C (self employment). If you deduct on Schedule C, your adjusted gross income (AGI) is lowered. If you deduct on schedule A, it doesn't affect your AGI. If your AGI is in the wrong bracket, you lose deductions. |
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10/24/2006 12:51:39 PM · #9 |
How are you paying for it?
One should not make business decisions based on taxes as the tax code can change, but also remember that taxes are the biggest expense you have and the more you make the bigger it gets.
Also your business structure may be a factor in what you decide to do - a sole proprietor will want to look at things differenctly than a LLC/corporation.
You can write it off in one year as an expense - my acc't thinks this is the best way most of the time. BUT if you have a loan on it and pay the loan over lets say, 2 years, then for much of that loan term you have a payment to make and nothing to deduct, tax wise.
If you depreciate it over 5 years and don't keep it that entire time you lose some of that deduction.
Either way, if you sell it you have to claim that as revenue. I dont think it'd be subject to capital gains tax in any way - it's not real property or an investment vehicle like stocks or bonds - it could very well be considered inventory and you don't pay captial gains on that stuff ever. Besides, the odds of you keepin a camera for a year or more and selling it for a profit is extremely remote.
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10/24/2006 12:55:22 PM · #10 |
Originally posted by hankk:
But as to the OPs question, Getting new equipment every year means you are out of pocket that amount ($700). There are hidden costs, like you may have to get new accessories (like a spare battery) and may have to learn a new user interface on the camera.
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But a new camera every year is less likely to have downtime for repairs or maintenance, so that can be a true savings. it's why many people buy new cars - to get the warranty and reliability - but it's always cheaper to drive used.
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10/24/2006 01:45:34 PM · #11 |
Originally posted by Prof_Fate:
Either way, if you sell it you have to claim that as revenue. I dont think it'd be subject to capital gains tax in any way - it's not real property or an investment vehicle like stocks or bonds - it could very well be considered inventory and you don't pay captial gains on that stuff ever. Besides, the odds of you keepin a camera for a year or more and selling it for a profit is extremely remote. |
I'm not an accountant so take this with a grain of salt. If you sell you camera after a year (or two, if you upgrade every time Canon comes out with a new body) you would do something like:
Cost of camera = what you paid - all deductions you've taken on the camera
Profit (or loss) = what you sell the camera for - Cost of camera - cost of selling camera (shipping, ebay charge, etc.)
So you could have a profit if you sell after a couple of years. Lets say you buy a 1DMIIn for $3500. You keep it for two years ($1400 depreciation, your cost is now $2100) You sell it for $2350, so you make a modest "profit".
As far as capital gains, you'd have to speak with an accounant. |
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10/27/2006 09:37:07 PM · #12 |
capital gains kicks in depending on how long you've owned the asset i think...but I try not to think too often :D
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