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FORUMS Post Processing, Marketing & Presenting Photos The Business of Photography 
Thread started 27 Dec 2010 (Monday) 10:44
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I'm in a bit of a bind...

 
Dkrogh
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Jan 01, 2011 02:57 |  #76

cjw wrote in post #11550626 (external link)
Isn't Section 179 in effect for 2010 allowing you to expense capital expenditures instead of depreciating them? I think it is but the rules are different than prior years. Ask your CPA about it. You may be able to deduct 100% this year.

Depositing in an IRA was a better idea than buying equipment you might not need just to avoid paying income tax.

Section 179 deductions does allow you to expense all in year of expenditure and only up to x amount of dollars which in most cases is 250k. The 2011 Master Tax Guide by CCH has most of the needed tax information for the 2010 tax year.


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neil_r
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Jan 01, 2011 05:57 |  #77

mikekelley wrote in post #11525780 (external link)
How about donate some money to a charitable cause you believe in?

Like The United States of America!


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Alleh
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Jan 01, 2011 20:43 |  #78

tcusta00 wrote in post #11522840 (external link)
I'm confused. If you have $XX in profit over and above your expenses you won't end up owing that whole amount in taxes.

I am with this guy. I think you need a new Tax lady. Would you even have to pay taxes if you don't make at least like $8k or something like that? If you just need an excuse to buy gear then go do it. Making a profit isn't really a bind it's what your supposed to do in a business.


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imahawki
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Jan 01, 2011 20:55 |  #79

mpix345 wrote in post #11526069 (external link)
I wonder about the OPs scenario in a reversed kind of way. What must you do to prove you are a pro photographer? If I have my attornery set up an LLC for me - OOF Wedding Photography - and then go and drop $10,000 on cameras and lenses for "the business" but never actually get a paying job what happens? Can I write off my $10,000 "investment"? How does the IRS know if I am a scammer, a victim of the economy or just a crappy photographer?

I don't advocate these sorts of shenanigans, but this thread got the imagination rolling a bit...

The problem is you spent $10k, so what? What is it a deduction against? You'd have to have $10k worth of income which you could then wipe out. Losing money doesn't do you any good because you just reduced your tax burden from $0 (break even) to $0 (lost money). You haven't gained anything except a $10k hole in your wallet. To be clear Can I write off my $10,000 "investment"? The question is, against what?

The IRS does allow you to deduct hobby expenses from hobby income. This is a better route than a shell business that never makes money which is just going to get you audited.


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maxharvard
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Jan 03, 2011 13:09 |  #80

Alleh wrote in post #11555245 (external link)
I am with this guy. I think you need a new Tax lady. Would you even have to pay taxes if you don't make at least like $8k or something like that? If you just need an excuse to buy gear then go do it. Making a profit isn't really a bind it's what your supposed to do in a business.

Err... yes.

I have 2 other full time jobs that I get paid a fairly significant wage on. Plus the jobs I got paid for this year are 1099 jobs. The companies are sure as hell going to claim that on their taxes, so I must as well.


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fxdb
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Jan 03, 2011 14:44 |  #81

From www.irs.gov (external link) - specifically hobby loss rules for all the "business" owners:

In general, taxpayers may deduct ordinary and necessary expenses for conducting a trade or business. An ordinary expense is an expense that is common and accepted in the taxpayer’s trade or business. A necessary expense is one that is appropriate for the business. Generally, an activity qualifies as a business if it is carried on with the reasonable expectation of earning a profit.

In order to make this determination, taxpayers should consider the following factors:

Does the time and effort put into the activity indicate an intention to make a profit?
Does the taxpayer depend on income from the activity?
If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?
Has the taxpayer changed methods of operation to improve profitability?
Does the taxpayer or his/her advisors have the knowledge needed to carry on the activity as a successful business?
Has the taxpayer made a profit in similar activities in the past?
Does the activity make a profit in some years?
Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?

The IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year — at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses.


As far as tax write-offs for equipment (depreciation) a taxpayer can elect to take section 179 depreciation max of $500K (new or used), or sec. 168 bonus depreciation (new equipment only with no limit), reported on form 4562

Subsequent asset sales are subject to re-capture rules. (you have to report those on your income tax returns form 4797)


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Supersteve911
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Jan 04, 2011 05:09 |  #82

I'm no business major but I'm so confused by all of this. Why don't you just pay taxes like the rest of us? I know no one likes to pay taxes but it is what it is. You have to have a profit to live. You can't "break even" and still be able to pay a mortgage, buy food etc. If that is the case, I'm in the wrong line of work and will quit right now and go into photography full time.


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SMP_Homer
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Jan 04, 2011 08:16 |  #83

TGrundvig wrote in post #11523450 (external link)
So, when I bought my Bigma 50-500 I was asked by my CPA 'how often is that lens used for work?' I have used it, but not enough to argue it was primarily for work. Truth is it was more for personal use. So, we did NOT put that lens on the list of deductions.

There is no such thing as 'personal use'

It's either for professional reasons, or for testing & practicing. Testing & Practicing only comes when you're not actually shooting for profit...


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Dkrogh
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Jan 04, 2011 14:38 |  #84

SMP_Homer wrote in post #11570403 (external link)
There is no such thing as 'personal use'

It's either for professional reasons, or for testing & practicing. Testing & Practicing only comes when you're not actually shooting for profit...

nicely said.


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maxharvard
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Jan 10, 2011 15:11 |  #85

Supersteve911 wrote in post #11569916 (external link)
I'm no business major but I'm so confused by all of this. Why don't you just pay taxes like the rest of us? I know no one likes to pay taxes but it is what it is. You have to have a profit to live. You can't "break even" and still be able to pay a mortgage, buy food etc. If that is the case, I'm in the wrong line of work and will quit right now and go into photography full time.

you missed my exact reasoning 2 posts up.

https://photography-on-the.net …p?p=11564886&po​stcount=80


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maxharvard
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Feb 21, 2011 10:46 |  #86

Well,

Here's the ending of the saga that is my life in taxes.

I bought a bunch of gear to try and off set some of the profit, but in the end I still ended up owing a fair chunk of money just in federal income taxes. (Think at least 4 figures)

I still got money back from my other jobs in the long run, just not as much had I not done the photo business at all last year.

Thanks for everyone's help.

~Eric


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