Side business to support habit?

[cajunclicker]

Hey yall, would you say that it would be worth it to have a legitimate photo business to help pay for good equipment and such.It seems that travel and expenses could be deducted for expenses to get stock photos and such.It sounds too easy and too good to be the case.What do you know.I'm clueless.

[zelseman]

The stock industry is much harder than it appears. I would suggest a portrait business instead.

[WMS]

Having a "business" just to justify paying for equipment and deducting it on your tax return is not a good idea as unless you can show that you have a realistic expectation of turning a profit. Which has been interpreted as showing a profit in three of five years the IRS can and has declared your business a 'hobby' and therefore you are not entitled to any deductions but are still liable for the tax on the income.

Wayne
Hobbyest

[jhuckelberry]

Having a "business" just to justify paying for equipment and deducting it on your tax return is not a good idea as unless you can show that you have a realistic expectation of turning a profit. Which has been interpreted as showing a profit in three of five years the IRS can and has declared your business a 'hobby' and therefore you are not entitled to any deductions but are still liable for the tax on the income.

Wayne
Hobbyest

are you sure? I was told that even as a hobbiest if you make money you can deduct up to that amount on your taxes.

At least according to my tax software last year.

[WMS]

This is my understanding of the issue, As a hobbyist you do not fill out a 'self employment' form and it is on this form (schedule SE?) where you would take equipment deductions. Capital equipment like Cameras and Lenses is also a asset which would be depreciated and depreciation is also something which you would not take.

However I could be wrong, As my stepfather who had a major tax preparation practice would say "you can deduct anything up to when it is audited. But if you are wrong the penalties and interest are a pain in many places"

Wayne

[zagiace]

I would be surprised if many hobbyist truly break even. Even if you are just trying to offset the costs of equipment.
You may find you require more equipment and other unforeseen expenses to be able to offer your services as a professional.
If you are looking for a second income then I would heatedly suggest approaching it like any other business venture and do your best to make a real profit. Starting out just trying to cover equipment expenses IMO is not going to be the proper motivation.
You may have some unique situation that affords you a tremendous pool of clients from which to draw your customer base, in which case ignore everything I say.
In short, it still "Takes money to make money."

[Mike R]

My CPA told me that if the business doesn't show a profit, you usually have to spread the cost claim of equipment over 5 years. He also made me pay my state a "use tax" on everything I purchased on line and didn't pay any sales tax on. I bought a 7D in 2009. If I cannot claim it all at once and have to pay the use tax, I won't claim it at all.

[WMS]

My CPA told me that if the business doesn't show a profit, you usually have to spread the cost claim of equipment over 5 years. He also made me pay my state a "use tax" on everything I purchased on line and didn't pay any sales tax on. I bought a 7D in 2009. If I cannot claim it all at once and have to pay the use tax, I won't claim it at all.

In most stated you would still owe the 'use tax' and are supposed to report report these purchases.

Wayne

[Mike R]

In most stated you would still owe the 'use tax' and are supposed to report report these purchases.

Wayne

At least my accountant is keeping me honest, :lol:

[Karl Johnston]

Also depends on your local tax laws of course, IRS isn't universal and you don't go into detail of where you are

[spkerer]

Also depends on your local tax laws of course, IRS isn't universal

If they had their way they would be!

and you don't go into detail of where you are

I'm guessing - just guessing here - but that with a name like CajunClicker he may be somewhere down in Louisiana. :)

It is surprising how many people don't even give the slightest hint of where they're from - and then ask a question whose answer varies by locality. I think most of it is just not realizing how global these forums are and just assuming its all U.S.

[WMS]

It might also be worth noting that California is trying to extend it's sales tax laws to the entire internet community. The idea is that if you sell something to a California resident you will be required to submit California sales tax to the state, regardless of whether or not you have a physical presence in the state, or have any reason to be aware of California state law, Oh say you lived in Canada. I hope that this does not pass the state assembly, as I see nothing but problems with laws of this nature.

And now back to our regularly scheduled topic ...

Wayne

[Karl Johnston]

It might also be worth noting that California is trying to extend it's sales tax laws to the entire internet community. The idea is that if you sell something to a California resident you will be required to submit California sales tax to the state, regardless of whether or not you have a physical presence in the state, or have any reason to be aware of California state law, Oh say you lived in Canada. I hope that this does not pass the state assembly, as I see nothing but problems with laws of this nature.

And now back to our regularly scheduled topic ...

Wayne
easy enough...just have them pick it up in Nevada :D