Reminder! Record your mileage on January 1!

White Sands Layers - copyright Carolyn E. Wright

Regardless of whether your photography is a business or a hobby, you may be able to use it to make a difference in your tax obligation. Specifically, if you are running a photography business, even part-time, the costs to run it can offset your income – not just the income from your photography business but from your day job, as well. If your photography is a hobby, then the costs to support it can be deducted from the income from your photography.

The key is to keep good records, using the tax laws to your advantage. For example, you may be able to deduct your automobile expenses from your taxes. You have two options: you either can track the mileage that you travel for photography purposes to deduct the government rate per mile (currently $0.535); or you can calculate what it costs to operate your vehicle for the year and apply the percentage that you use your automobile for photography to determine your auto expense.

BUT FOR EITHER method, record the starting mileage for your vehicle each year. Check with your tax advisor and the IRS website for more information.

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Tax Information for Photographers

Dolphin Jump Mirror - Copyright Carolyn E. Wright

Taxes are a headache for everyone.  But photographers often have special tax issues to consider. How do you find out what applies to you? Go to your states tax website and search for “photographers.”

For example, conducting an Internet search on “Nevada state tax,” this website is one of the top options:

http://tax.nv.gov/

After entering “photographers” in the search box in the upper right hand, one of the results leads to this:

http://tax.nv.gov/uploadedFiles/taxnvgov/Content/TaxLibrary/October%202011%20Nevada%20Tax%20Notes%20Issue%20176.pdf where you can get important information.

The IRS website also offers information for photographers.

Spend some time learning about your tax obligations so that you can keep on shooting!

 

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Must Read: Tax Court Ruling Is Seen as a Victory for Artists

Maroon Bells and Aspens - Copyright Carolyn E. Wright

As my post back in 2005 stated:

Regardless of whether your photography is a business or a hobby, you can use it to make a difference in your tax obligation. Specifically, if you are running a photography business, even part-time, the costs to run it can offset your income – not just the income from your photography business but from your day job, as well. If your photography is a hobby, then the costs to support it can be deducted from the income from your photography.

The New York Times reports that the United States Tax Court has confirmed this approach. Advice from a CPA is the best way to address your specific needs.

Update: Additional thoughts on the ruling are available at Forbes and from a law professor.

 

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Easing the Taxing Part of Photography

Part of knowing your legal rights and responsibilities as a photographer is reporting your taxes properly.  While you must comply with the law, you also don’t want to overpay.  Do what you can to learn on your own what to do.  Some good resources are available through:

But nothing can replace a good CPA who understands the nuances of your photography business. You can find someone to join your team by asking your colleagues, the American Institute of Certified Public Accountants, and/or some Volunteer Lawyers for the Arts groups, such as those in Kansas City and St. Louis that also provide accounting services, for recommendations.

In addition, here are some accountants who specifically help photographers, such as:

Rocco Abbondandolo C.P.A. – serving photographers in the NY tri-state area (mainly NYC and Long Island)

Woloshen & Herman C.P.A. – NY

Harold J. Nelson Accountancy Corporation – CA

Howard Choder – WA

Mark Gaynor, CPA – GA (Mark’s email)

Vitale & Miller, P.A.  – FL (Greg Miller’s email)

Michael Arena –  CA  (Michael’s email)

Note: These referrals are not endorsements. Be sure to check the qualifications of any professionals before hiring them.

With the knowledge you obtain and help you get, you then can concentrate on other things, such as what camera you’re going to purchase with your tax savings!

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Deductions for Donating Photography to Charities

Many photographers are asked to donate prints or to license photographs to charitable organizations for use in their fundraising efforts. So is any of that deductible on your tax return? It depends.

IRS Publication 526 explains the rules related to charitable contributions. You can download a copy from the IRS website.

Before you can deduct anything for your donation referenced here, you either have to itemize your deductions on a Schedule A (as opposed to taking the standard deduction) or you have to report the profit or loss from your photography business on a Schedule C (for a sole proprietorship) or on your company’s tax return. Your donation also must made be to a qualified organization (Publication 78 lists most qualified organizations or you can check the charitable organization’s status with the IRS at 1-877-829-5500).

If you meet the above criteria, you may deduct the smaller amount of either the costs of the donated item (paper, ink, CD) or the fair market value of the property at the time of donation. The fair market value generally is the price at which the property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all of the relevant facts.

In most cases, the costs of the donated print or photo will be less than the fair market value. For photographers who have an established photography business, they most likely already have deducted the costs (materials such as ink, paper and CDs) as business expenses and cannot again deduct the contribution. The hobbyist photographer who does not deduct photography materials for a business is the only one who really benefits from this situation.

What about your time and talent that it takes to take the photo? Publication 526 specifically states that you cannot deduct the value of your time or services.

You’re also out of luck if you donate your entire copyright to a charity. IRS Form 8899 provides that you cannot deduct as intellectual property a copyright held by a taxpayer whose personal efforts created the property.

What can you do if you want to help the charity? Charge your normal fees for your work and otherwise make a direct cash donation to the charity. Or just donate your work and be satisfied with using your talents to help others.

When dealing with tough tax issues, it is always best to personally consult with a certified public accountant or tax attorney. You also can contact the IRS directly for help at 1-800-829-1040.

Take my advice; get professional help.
PhotoAttorney

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Do It Yourself

It’s tax time. You’ve got to start going through those receipts to look for business deductions. You review the forms and read the circulars. But the tax code is complicated. Unless you also are a CPA, you have to consider your options for preparing your tax return.

You can do it yourself. You can fill out the tax forms the same as you did last year. The advantage is that there’s no initial outlay of costs. The disadvantage is the time it takes. A risk is that you’ll miss some tax breaks. The bigger risk is that you’ll report something incorrectly and be fined and/or penalized.

You can do it yourself with some help. You get Turbo Tax, or another tax software program. The program is helpful – it checks your math and prompts you for deductions. The cost is reasonable. But how personalized can a computer program get?

Or you cry uncle. You hire a CPA, discuss your tax situation with her, and organize your files to give her the best information. She prepares your tax return armed with knowledge and experience to give you the most from the tax code. Sure, the upfront cost is more. But so is the return.

It’s the same with a lawyer. You can do a lot of your legal work yourself. It will take more time, and you might get it wrong. But you’ve saved a few bucks upfront. The question then is, what will the costs be in the long run? Isn’t your photography important enough to get the best help? So maybe for this one, you shouldn’t do it yourself.

Take my advice; get professional help.

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