I'm in a bit of a bind...

....I have call already into my tax lady about what I need to do, but would also like some other opinions.

Basically, here's what happened.

I made too much.

I made more than I spent. Now, do I spend the remainder on gear? or take the hit on taxes and lose the money entirely? Do I spend the entire amount I went over? (Ex; I made $10 and only spent $3. The remainder is $7 I owe for taxes.)

My first thought it to buy gear. Hell, I need it and it provides yet another tax write off (depreciation) at the end of the next 7 years.

Also, anyone know if I can write off a gift someone gave to me? (probably not, but worth asking)

Thanks guys

~Eric

[Jim Poor]

Originally Posted by maxharvard

....I have call already into my tax lady about what I need to do, but would also like some other opinions.

Basically, here's what happened.

I made too much.

I made more than I spent. Now, do I spend the remainder on gear? or take the hit on taxes and lose the money entirely? Do I spend the entire amount I went over? (Ex; I made $10 and only spent $3. The remainder is $7 I owe for taxes.)

My first thought it to buy gear. Hell, I need it and it provides yet another tax write off (depreciation) at the end of the next 7 years.

Also, anyone know if I can write off a gift someone gave to me? (probably not, but worth asking)

Thanks guys

~Eric

Actually, below a certain threshold, you can write off gear purchases in their entirety during the year of purchase rather than going the depreciation route. I'm thinking of doing that with another D3S if I can scrounge enough cash in the next couple days.

[filemanager]

I'm told in Canada you can write off gifts you've received at their value

[Biomech]

I don't get it, you want to spend ALL of the money you make?

Isn't there a cap on what you can claim as expeneses? There is in the UK. Otherwise people would make £50,000 and then spend it all and never pay tax.

How do you have your business? (In the UK) If you're a sole trader you take all profit and pay tax on the lot, if you're making shit loads you setup as a registered company, you take a wage that's taxable and then the rest of the cash goes into the company as capital - then you're company becomes worth XX amount.

[zona5101]

You may want to look into income averaging to spread this years income back over previous years. You'll also want to max out your 401/self directed IRA. And of course, increasing deductible business expense, website, brochures, promotions.advertising, more gear - The best is to capture expenses already incurred (but not recognized) rather than creating new expenses. Your tax person should be able to help you.

Originally Posted by filemanager

I'm told in Canada you can write off gifts you've received at their value

Not in America, you can't.

Originally Posted by Jim Poor

Actually, below a certain threshold, you can write off gear purchases in their entirety during the year of purchase rather than going the depreciation route. I'm thinking of doing that with another D3S if I can scrounge enough cash in the next couple days.

Yea, at first it was looking like a HUGE extra Xmas for me for photo gear, but thankfully my tax lady worked with me and found a bunch of things I missed

Originally Posted by Biomech

I don't get it, you want to spend ALL of the money you make?

Yes, actually. I have 2 other jobs that pay my bills and pay my taxes. And the things I would purchase are things I would need to keep doing my work well. So, yes, I do want to spend it all. It's not so much about spending money as it is about avoiding paying taxes.

Why give up the money in taxes (poof, gone forever!) or spend it on useful gear and have something of value?

My logic seems more appropriate.

Originally Posted by zona5101

You may want to look into income averaging to spread this years income back over previous years. You'll also want to max out your 401/self directed IRA. And of course, increasing deductible business expense, website, brochures, promotions.advertising, more gear - The best is to capture expenses already incurred (but not recognized) rather than creating new expenses. Your tax person should be able to help you.

Yea, my tax lady has been helping me big time with this stuff. She noticed HUGE deductions I missed

[Sime]

Well, if Shawshank redemption is correct, you could make a one time, tax free gift to ME... oh, wait, that's to your wife.. err.. oh well.. ;-)

It's a great position to be in though, eh Eric, profitable as a photog / all your other stuff. well done.

S

[Jim Bryant]

Purchase another D3s. I always find ways to cheat (whoops) agh, be creative when claiming deductions. I have paid a penny to IRS since 1996 and get back everything I'm entitled to receive.

[thall17]

Spend more

Thanks everyone for the input.

After talking with my tax lady, she pointed out a few deductions that I had been missing;

• - Mileage ($.50/mile)
• - Depreciation at a greater rate that I had previously anticipated
• - Dedicated Home office (all i have to do is remove a few storage items from the room and it's a dedicated office.
• - Cell phone usage (more than I thought about)
• - Computer purchase/usage

All that added up for a HUGE chunk of my "profit", so all-in-all I still made a profit, just a much smaller one than I had previously calculated.

I have decided to take some of the profit and reinvest in some equipment and leave the rest as 'profit' for the government to see that I am actually running a business and not just a 'hobby'. The combination of those two strategies gives me the best options for gear and out of pocket expenses as far as my pocket book and the government getting their cut are concerned.

Really glad I didn't have to spend that much money to break even and the gov't sees a profit and gets a share of it. So, it's a win-win for both of us.

Thanks again!

~Eric