Lens ? for an accountant

BigBlueDodge wrote in post #12125068
You depreciate to lower your tax basis. If you pay no taxes then there is no need to depreciate your gear. In fact, I personally wouldn't do it, as I stated previously, any item that you depreciate is the property of your business, and requires that you track,and report any sales later. If you don't need the tax write off (which you don't since you pay no taxes), then just keep it as a personal item.

^^ yes,
Why even bother with any of this?
Unless you are making significant money on buying and selling lens it's not worth it!

If you plan to sell the lenses in the future, you could 'sell' them to yourself first for he depreciated/residual value. Anything you do w/ the lenses after that will not be on the books.

lost canadian wrote in post #12125112
If you plan to sell the lenses in the future, you could 'sell' them to yourself first for he depreciated/residual value. Anything you do w/ the lenses after that will not be on the books.

You have to be careful selling it to yourself for less than market value. If you get audited, they'll decide you owe tax on the gain.

Take the depreciation and then you could give it as a charitable contribution to me!!!!

I'll even give you a receipt!

No profit taxes, and you get to deduct the depreciation expense! Everyone wins!!!!

Guess I am sorry I asked, the fog is thickening.

Gasrocks, ask your tax preparer for an explanation and then decide if you need to switch to another professional.

Trying to get your question answered by an uninformed amateur committee is probably the worst thing you can do. We don't even know if you have a photography business or whether your idea of "I pay no taxes" means that you actually pay no taxes or means that you don't owe additional money when you file your return.

Yes, I see my CPA tomorrow and will ask some questions. This whole idea of a lens is worth nothing after it is 5 years old bothers me.

gasrocks wrote in post #12127142
Yes, I see my CPA tomorrow and will ask some questions. This whole idea of a lens is worth nothing after it is 5 years old bothers me.

yes, have a conversation with your accountant. Clear up those misconceptions !

I doubt he can clear my head ever when it comes to accounting. About equal to my trying to teach him lenses.

gasrocks wrote in post #12127142
Yes, I see my CPA tomorrow and will ask some questions. This whole idea of a lens is worth nothing after it is 5 years old bothers me.

Its not about saying its worth nothing after 5 years. Its about fairly spreading out its cost over the years in which it generates revenue.

gasrocks wrote in post #12127313
I doubt he can clear my head ever when it comes to accounting.

Perhaps I'm overstepping the bounds of being polite, but if your accountant can't clear your head about accounting, maybe you need a new accountant.

gasrocks wrote in post #12126249
Guess I am sorry I asked, the fog is thickening.

I would try to put this two scenarios to try to clarify this situation.

Assume that you buy your manual focus lens for $100, depreciate it over 5 years at $20 per year and your tax rate at 30%.

Scenario 1: you sold it at the end of year 2 for $120 (real gain $20)
Year 1: Depreciate your lens $20. Book value of the lens at the end of year 1: $80. Tax credit $20*30%=$6. You get $6 tax credit.
Year 2: Depreciate your lens $20. Book value of the lens at the end of year 2: $60. Tax credit $20*30%=$6. You get $6 tax credit.
You sold the lens for $120 and gain $60 over your current book value of the lens ($60). The tax you pay for the gain $60*30%=$18.
Over 2 year you paid $6 tax which is exactly 30% of your $20 gain selling the lens at $120.

Scenario 2: you sold it at the end of year 2 for $80 (real loss $20)
Year 1: Depreciate your lens $20. Book value of the lens at the end of year 1: $80. Tax credit $20*30%=$6. You get $6 tax credit.
Year 2: Depreciate your lens $20. Book value of the lens at the end of year 2: $60. Tax credit $20*30%=$6. You get $6 tax credit.
You sold the lens for $100 and gain $20 over your current book value of the lens ($60). The tax you pay for the gain $20*30%=$6.
Over 2 year you earn $6 tax credit which is exactly 30% of your $20 loss selling the lens of $80.

My calculation is theoretical since I am Finance major, not an Accounting major but if you have any questions let me know

gasrocks wrote in post #12127142
Yes, I see my CPA tomorrow and will ask some questions. This whole idea of a lens is worth nothing after it is 5 years old bothers me.

Your accountant is not saying that the lens is worth nothing after five years.

He is saying that the tax laws allow you to deduct the cost of the lens from your income, just not all at once. The tax laws are very specific about how much of an expense you can deduct per year, but the laws don't have anything to do with how much the property is worth after those tax deductions.

For example, you can depreciate a real estate rental investment over 27.5 years and take a maximum of 1/27.5 deduction each year (for a $275,000 property, that would be $10,000 per year). However, that doesn't mean that at the end of 27.5 years the house is worthless. The law simply tells you over how many years you are required to spread out the deduction.

Thanks everyone. Like I said I am in a fog when it comes to accounting. I'll ask him a few questions and then I'll probably go on and find something else to worry about.

gasrocks wrote in post #12130345
Thanks everyone. Like I said I am in a fog when it comes to accounting. I'll ask him a few questions and then I'll probably go on and find something else to worry about.

I like to figure things out and hate hiring someone to do things for me. So, for years and years I did my own taxes.

Then I had a couple of complicated years and realized that completing a tax form isn't like building something. The only way to really learn how to prepare tax returns is through lots of experience with the IRS; learning what they expect, what they will or won't accept, and knowing what triggers their computers to call for an audit.

My tax preparer saves me money, makes me more honest, and protects me from audits, all at the same time and for very little cost. The key component is that I trust him 100%.