Well, it is that time of year again. The one we all know and love as Tax Time. As photographers, it is especially important to take full advantage of tax deductions. Educating yourself about these deductions is probably thee most important tool you can have when it comes time to file. Be sure that you kept good track of all the expenses you had throughout the year. This will play a big roll in the amount you can actually deduct. Keep in mind that if you have no record of an expense, you can not deduct it as such. The last thing you want is the IRS knocking on your door.
Before we get any further into this whole tax thing, you must determine if your photography business is a hobby or for-profit. According to the IRS website, the following should be considered:
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
So if your business is a for-profit business and not a hobby, we have prepared a short list of valuable deductions you should consider.
Use of any information from this site is for general information only and does not represent personal tax advice either express or implied. You are encouraged to seek professional tax advice for personal income tax questions and assistance.
1. Insurance & License
Most professional photographers have a separate insurance plan for their photography business. This is tax deductible. Also, any type of license for your business or photography is deductible. That also includes any county or city permits too.
Any equipment that has a lifespan greater than a year is considered an asset. With these types of assets you may have the opportunity to do several different things depending on the rules that apply to your business. For example, I purchased a lot of new equipment this year. Since my business made a significant profit, I was able to deduct the full amount for this year. The options include:
– Spreading the deduction over several years. (Recommended if you anticipate having greater income in the future, and want to reduce your taxable income at that time.)s
– Deducting the full value of the item this year. (Take the Section 179 deduction) (Recommended if your business is showing a profit.)
If you purchased new you may have the following options available for your equipment as well:
– Taking a partial section 179 deduction this year and the 50% special depreciation allowance.
– Taking the 50% special depreciation allowance and spread the remainder over several years.
3. Subscriptions (Including Internet & Website Expenses)
Any type of subscription, monthly or yearly, may be deducted. This includes magazines, newsletters, software, studio management programs, hosting providers, domain registration, etc.
4. Meals & Entertainment
This is very important for wedding photographers who generally entertain potential clients during consultations. Meals, coffee, beer, etc can be written off as a business expense. You can deduct up to 50% of this cost. Heck, if you take your clients to a baseball game, you can deduct that as long as you talked a little about the upcoming session or wedding. Be sure to keep your receipts and records of these expenses.
5. Vehicle Expenses
If you use a vehicle to travel for any business related work then you can deduct that. There are two ways of going about this deduction. The first way is called the Standard Mileage Deduction which gives you a cost per mile. The current government reimbursement rate per mile is $0.56. Which is not too bad at all. I received a large deduction using this method. Just be aware that you MUST keep track of the mileage you drive for business use. I do this legally by using a mileage tracker to record my driving. You can get one for $5 here. This is also a reason I have no problem traveling for weddings. The second method is called the Actual Expense Deduction. This method is where you record all of the expenses of using your vehicle throughout the year (oil changes, new tires, repairs, etc.) You then take the percentage of time you used the vehicle for business and apply that to the total expense to see what your deductible amount is. I have never used this method because it is generally less. Either way, be sure to record your mileage at the beginning of the year.
You can deduct all reasonable expenses from business travel throughout the year. This includes airfare, hotels, car rentals, etc. Just be sure to keep record of all your receipts. You cannot deduct your trip to see Aunt Lucy in California if you did nothing business related. The IRS is smart, and this will not fly with them.
7. Office & Studio Space Expenses
If you buy or rent any type of studio/office space or gallery space, this can be deducted. If you have a single room in your home that you use solely for the business then you may be able to deduct a percentage of your mortgage or rents based on the square footage of the room. Please look into what is considered a home office as there are MANY rules and regulations.
8. Legal & Professional Fees
Any attorney fees, accounting fees, trademark fees, copyright fees, etc that are related to your business are deductible.
9. Second Shooter Expenses
Most people look over this. Do not forget that when you hire a second shooter, they are considered contract work. This is deductible. If you pay a single person more than $600 you will have to send them a form 1099. I use Turbo Tax and they do it all for me which make things super easy.
10. Education Expenses
Did you attend school for photography or something to do with your business? Did you attend a workshop of similar? This is all tax deductible.
Hopefully this article gives you a pretty good idea of the things you can deduct on your taxes this year. Be sure to always consult a professional if you have any questions. If you found this helpful please share it using the social share buttons above.
If you have any questions or advice, we would love to hear it in the comment section below.