Tax Rewards!

Last year I decided to turn my hobby into a small business on the side. It is a very simple process which has great tax benifits! Part of the last round of stimulus included the ability for a small business to depreciate equipement all in the same year of purchase (see section 179 depreciation). In short, I spent about $4,600 in gear, computer equipement, travel, software and advertising (my website). This $4600 offset my taxable income, putting about $1000 back in my pocket!

If you plan on spending a significant amount of money on gear this year, it may be worth your while to turn your hobby into a business. I'm not sure if the section 179 rule will be around in 2013, but you can still depreciate over several years if it is not.

How hard is it? Two pieces of paper in NY state. Register your business name in the county you live in and apply to the state for a tax collection certificate.

Disclaimer: This is an FYI and not financial advice. I think there are a lot of people that may think this is complicated, it is not!!


It is also very easy to file with your personal return. I've used freetaxusa.com for about the last 6 years. The only thing different this year was entering the business purchases, the site did the rest. ($10 to complete and Efile your fed and state return). I can't believe how many people I know who are still paying H&R or a tax pro for simple returns.

Time to expand!

Shhhh....that's our little secret! Truth be told, having a business license and a tax resale ID can come in handy for a ton of things.

Dave_W said:

Shhhh....that's our little secret! Truth be told, having a business license and a tax resale ID can come in handy for a ton of things.

Click to expand...

Except for when you have to pay use tax!

i did the same thing rick. I just started doing my taxes and have to add my depreciation things in. Since the wife went to a less paying job and I didn't do as much OT last year we were already in a lower tax bracket. Now with my business it should lower me even more.

I have been swamped, but this year I am going to set mine up as an LLC

Hmmmm. Can you do it retroactively for 2012? (please, oh please)...

Backdoor have you filed for 2012 did get business set up in 2012 call your tax guy/gal. Don't think so but not a tax person

I know there are certain things you can do in the current year that can impact your prior year's tax return, but I suspect that I would have needed to at least actually file paperwork for the business in 2012, even if it was getting it postmarked on 12/31. I'm taking a hard look at doing i this year, even though I did the lion's share of my buying for a while last year. Live and learn.

BackdoorHippie said:

I know there are certain things you can do in the current year that can impact your prior year's tax return, but I suspect that I would have needed to at least actually file paperwork for the business in 2012, even if it was getting it postmarked on 12/31. I'm taking a hard look at doing i this year, even though I did the lion's share of my buying for a while last year. Live and learn.

Click to expand...

Even if section 179 expires you'll still be able to depreciate future purchases over a few years (14-24?), next computer, router, office furniture, printer, ect. If you sell few prints you can also expense mileage, travel.

Given that 2012 included the D600, 28, 50 & 85mm 1.8g primes, and a loaded MacBook Pro Retina Display, it would have been REAL nice (and smart) to do it last year. Yeah, it was a good year of trading music gear for photo gear. Maybe I can sell my stuff to my new company in 2013? LOL

I know some tax guys that I'll talk to about what I can and can't do moving forward.

Actually you don't have to file anything to file a schedule C as a sole proprietor. I've been writing off my computer for longer than I've had an LLC.

Starting to pursue the LLC option and am wondering if this will now mean a separate insurance rider for equipment? Right now, just about every use of my equipment will have it fall under homeowners. But with the filing of a legal document I'm assuming I'll have to get separate coverage, no?

What is the minimum documentation that you'd need to establish a business? I started selling some of my stuff online last year and the sales were reported to the IRS. I'd love to write off what I can for camera gear, trips etc.

Not sure if its different in your respective countries, but in Australia you cannot depreciate your tools against income from a different job. Eg. You're a lawyer 5 days a week yet you run a mechanic business on the weekend. You cant claim your $20k of tools against your law income.
Luckily I work in IT where I have to take plenty of photos during site visits. That 70-200 really comes in handy when I need to read a serial number from across the room.