Tax Question - Can you write off rental gear?

[LMAshton]

Yeah, with equipment purchases, we get into the realm of assets and depreciation, and exactly how to handle that is governed by the laws of your area. Here's a very basic, short explanation of one way it might be handled:

Purchase $3000 DSLR in July 2010. Using a straight depreciation rate over 3 years, the depreciation could look like this:
$500 depreciated (expensed) in 2010 ($3000*1/3*6/12)
$1000 depreciated in 2011 ($3000*1/3)
$1000 depreciated in 2012 ($3000*1/3)
$500 depreciated (expensed) in 2013 ($3000*1/3*6/12)

Where it gets complicated is that different areas have different thresholds for the minimum value of the purchase - could be $500, could be $1000, could be something else entirely. Then there are the depreciation rates which are prescribed by each government, and the depreciation rates differ for each class of asset. Then there are different ways of calculating depreciation, ie straightline and a whole bunch of others that would confuse you even more than you're already confused. In other words, it can be quite complicated.

Which, in the end, boils down to talking to a tax accountant and getting proper advice on how you have to handle things according to your jurisdiction.


The bottom line is keep all your receipts for ALL business-related expenditures. And make sure there are sufficient details on the invoice/receipt so you can tell what it's for seven years later. Make notes if necessary. And consult a tax accountant.

[LMAshton]

Also, I second the comment about hiring someone now to get it right rather than trying to DIY and mucking it up.

I used to work as a freelance accountant. My clients were small and very small businesses, and typically, I was hired around 6 months to 1.5 years after the business started. And usually, the books I was given were a *huge* mess. Typically, untangling the existing books would have been more time-intensive than starting from scratch, which is what I usually ended up doing. Then the tax accountant took over, fixing tax returns from previous years for the client. Sometimes, the client ended up with government audits, which are expensive since inevitably, I'd have to be there to explain everything to the auditors, so add my hourly rate to the mix, and more frequently, the client ended up with penalties for incorrectly calculated taxes.

It's really not worth it to do it yourself unless you know what you're doing. Or you're willing to hand everything over to a tax accountant at the end of the year and pay them to fix things.