what exactly is a tax write off?

Question

I am a self employed photographers assistant and I was just curious, what part of my money do i get back? say I bought a new lens for my camera, do I get the tax back? or does the government just decide? thanks

Answer 1

If you use your lens 100% for business purposes, you can write off 100% of its cost. Meaning, you deduct the cost of the lens from your taxable income, so if you earned, for example, $40,000 last year, and the lens cost $100, with that deduction your taxable income would only be $39,900. Obviously, this isn't the only deduction you would include...there are plenty of other business expenses you could deduct from your taxable income, including the mileage you drive to get to your job (make sure you keep gasoline receipts!) It's something like 30 cents per mile driven (changes each year, and it's noted on your tax form), and you can deduct the round trips too.

This is why it's a good idea to keep receipts of all your business expenses when you have a freelance job, because they can add up to a considerable amount. You can estimate, too, if you don't have them, and the government won't usually audit you for it unless it is obviously exaggerated.

Oh and here's a bit of free advice for you which I got when I first had to pay tax on freelance income...open a SEPP IRA account, which is a self-employment retirement account, at a place like Washington Mutual. If you calculate your tax and find it's too high, you can deposit some funds into it to greatly reduce the amount you need to pay, and it's a retirement fund for later.

I also highly suggest you make an appointment with a tax professional who will be able to give you further advice on how to handle your income. It will cost you a couple hundred dollars, but the information you get is SO worth it, and the fee will pay for itself with the tax money you save.

Answer 2

You don't get any of your money back unless you have paid taxes into the system. Being a self-employed person you will file a Schedule C as part of your 1040 tax return, and will report your income and expenses (new lens for the camera for example) on it. If you have a net profit and the net profit is more than $400 you will have to pay self-employment (SE) tax as well as regular federal income tax, and possibly state income tax (if you live in a state with a state income tax). Federal income tax will depend on your tax bracket, which depends on filing status and taxable income level. SE tax is 15.3% of 92.35% of net self-employment income. State income tax will be at whatever your state rate is. For being self-employed you are supposed to pay quarterly estimates which are due 4/15, 6/15, 9/15 and 1/15 of the following year. The estimates should be either 90% of current year tax (hard to know until the year is over) or 100% (110% if high income person) of prior year tax.

Answer 3

Since you are self employed, there are certain things that you are allowed to write off on your taxes. You won't get the whole amount of the purchase back, but it will lower the amount of taxes that you owe the IRS overall and you will get more money back in a refund. If this is the first year that you are self employed, I would keep all of your receipts and then go in and have an account help you file your taxes. That way you can figure out what you can and can not write off and what the best options are.

Answer 4

As a self employed person you will be able to deduct your expenses from your income before determining the taxable income. The camera lens would be a deduction. you would have a choice to deduct the cost over the useful life of the lens or take all of the cost during the year of purchase. You should be careful to keep records of all of your expenses related to your work.

Answer 5

You are self employed and will need to file Schedule C (Form 1040) with your return.
If you purchase capital good for your business, you can choose to depreciate it or take deduction for the full amount under section 179.

Section 179 deduction.
You can elect to deduct a limited amount of the cost of certain depreciable property in the year you place the property in service. This deduction is known as the "section 179 deduction." The maximum amount you can elect to deduct during 2006 is $108,000.
(Figure for 2007 is more than $108,000).

Read this IRS publication:
Publication 334 - Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ) - Car and Truck Expenses

Answer 6

If you have a business license ,
You can add up the "costs" of doing business ,
Including equipment and deduct that from the revenues you receive .
Essentially , write-offs are expenses to doing business that you can subtract from the income to lower your tax bracket .

If you make $10,000 but have $4000 in expenses ,
Then your taxable is reduced to $6000 and you pay the calculated taxes on that amount .

>

Answer 7

A tax write off refers to certain expenses that you are permitted to deduct from your income tax. To find out which expenses qualify as a write off you should ask the person who prepares your taxes, preferably a qualified accountant familiar with tax laws. In any case you should always keep your receipts. In certain jurisdictions, by registering with the local revenu service and filling out a periodic form you can recoup the sales taxes which you paid.

Answer 8

You can save the receipt and use it with all of your other business expenses to show your tax guy at the end of the year.

A certain portion of it can be used as a tax exemption (reducing your taxes owed) depending on your total income and amount of deductions claimed.

You may not be able to exempt all of it but every bit helps.

Answer 9

As a self-employed person who obviously doesn't know a lot about taxes, you should probably go to a tax professional this year.

First of all, you are confusing the sales tax that you pay on a purchase with income taxes. They have nothing to do with each other.

Secondly, as a self-employed person, unless you have been making estimated payments, you will not get anything back. You will have to pay.

You might want to contact a CPA or EA in your area right now so you are not in for a big surprise after the first of the year.

Answer 10

It's anything you don't need to pay taxes on. I'm not accountant, but if you bought if for your business you probably don't need to pay the taxes. In other words, you can write it off.