I am a free lance photographer and that is not my full time job. If a camera purchase can be a work related deduction, what does that mean? Is it a tax credit or just a deduction from my gross income? THANKS!
2007-10-06 20:17:01 · 7 answers · asked by beaver_1946 3 in Business & Finance ➔ Taxes ➔ United States
It's not a tax credit (the government isn't going to buy you a new camera) but it is allowable as a tax deduction against your photography income if your photography meets the criteria to be considered a business rather than a hobby. If you are making money from your photography but as a hobby rather than a business, then the deduction would be limited - you can't show a loss on a hobby.
Things the IRS considers in determining whether an activity is a hobby or a business are:
Do you run the activity in a businesslike manner?
Does the time and effort you put into the activity indicate an intention to make a profit?
Do you depend on income from the activity?
If there are losses, are they due to circumstances beyond your control or did they occur in the start-up phase of the business?
Have you changed methods of operation to improve profitability?
Do you or your advisors have the knowledge needed to carry on the activity as a successful business?
Have you made a profit in similar activities in the past?
Does the activity make a profit in some years?
Can you expect to make a profit in the future from the appreciation of assets used in the activity?
2007-10-07 03:32:40 · answer #1 · answered by Judy 7 · 0⤊ 0⤋
The camera would only be a deduction from you photography business. You can either deduct the entire business use of the camera as a Section 179 deduction or just the depreciated value for each year for the business use of the camera.
If you only use the camera for your photography business and not for personal use, then you can deduct the entire cost of the camera (whether all at once or over the life of the camera).
However, if your photography business is deemed to be a hobby (meaning that you show a profit in less than 3 out of 5 years), then you can only deduct your expenses to the extent of your income.
2007-10-07 01:32:49 · answer #2 · answered by Steve 6 · 0⤊ 0⤋
Google these concepts -
Schedule C
Schedule C instructions
Hobby loss rule
Depreciation 4562
Basically, if you have a side business, then it's not just the camera but a whole host of things that may be at least partially deductible (camera 80% for business, 20% for taking pictures of your kid cannot be deducted 100%). Once it's no longer a hobby, you're in business. Report income, report expenses, pay taxes on the difference. (Not to mention you probably need a business license, etc.)
2007-10-06 22:56:45 · answer #3 · answered by heart_and_troll 5 · 0⤊ 0⤋
A "work-related deduction" means an expense that you paid related to employment. These deductions go on Schedule A. Your example is not "work-related."
Your freelance work is self-employment and is reported on Schedule C. If you purchase equipment for your freelance work you can deduct it. You can deduct the percentage of the cost that is equal to the percentage of business use. If you use the camera more than 50% for your freelance work, that percentage may be deducted in the year of purchase. If you use it no more than 50% for your freelance work you will have to spread out the deduction equally over 3 years.
The deduction is subtraced from your freelance income. It will not result in a payment to you, it may reduce taxes you owe.
2007-10-07 02:43:35 · answer #4 · answered by ninasgramma 7 · 0⤊ 0⤋
It would depend on if photography was a second occupation or hobby income and if the camera was exclusively a work tool. If you used it 100% for work it would be deductible. If it was part work tool part toy, IRS would probably call the whole thing hobby income which would make deductions subject to a 2% exclusion.
2007-10-06 20:43:24 · answer #5 · answered by Anonymous · 1⤊ 1⤋
You say its not a full time job. Are you claiming the income on your tax return from the photography job? If yes, it would be deductible on a schedule c but if not. Thats your first problem. Irs expects you to claim your income, you can't claim it as a work related deduction with your full time job if you don't use this camera on the job.
2007-10-07 00:14:12 · answer #6 · answered by appenzellar 2 · 0⤊ 0⤋
If your employer required you to buy it, AND if you itemize, you might be able to deduct the amount of the cost that's over 2% of your adjusted gross income, if you use it only for work.
2016-03-19 06:57:29 · answer #7 · answered by Anonymous · 0⤊ 0⤋