Question about Business/Tax Write Offs

[mson]

I'm taking a slow approach to starting a photography business. Basically I enjoy photography but I don't want it to "feel like work" so I am doing things at my own pace. I have friends insisting that I am silly for not writing off things like camera gear. From what I understand, as a business, I can deduct the cost of gear which would reduce my taxable income. Am I missing something or is this the only benefit?

Admittedly I have a lot to learn about these things but I don't see how reducing my taxable income by $3000 is a huge benefit, especially considering that if I did, I would need to turn a profit within a few years or the IRS might come and tell me to repay the deductions. Am I crazy?

[mnaz]

Nothing wrong with going at your own pace but why not enjoy the tax benefit? As long as you have legally formed a business (llc or inc) I would take the tax break in a second. Why would you want to pay more tax than you have to? Starting a business can be expensive which is why I think the IRS gives you 5 years to turn a profit (think thats what it is anyway).

[Zonieart]

You don't necessarily have to turn a profit in a certain timeframe. The IRS may want to discuss the situation if you don't, but as long as you can show an effort to run the business effectively, you should be okay. Make sure you get a business license if required in your state. Just make sure you're very diligent about keeping records of your income and expenses. By all means, if you are developing a business, take advantage of the tax deductions. If you are in the 28% tax bracket, $3,000 in tax exemptions you yield as much as $840 in tax savings.

[egordon99]

You don't need to be a LLC or other type of corporation to get tax benefits. You can fill out a Schedule C when you do your personal tax return. It's not that difficult, I've been using it for my music work for a couple of years now and get to pay taxes on photo stuff for the first time this year.

Not sure how equipment purchases work though, I usually just write off mileage, guitar strings, and some photocopying (for music). Since my camera equipment is mainly used for personal stuff (at least now), I won't be writing any of that off, just mileage and any out of pocket expenses.