Everyone with a photography business should consider the tax implications of their work, whether they’re a full-time photographer or a part-timer with a different job that pays the bills. As a professional, you have expenses, and those expenses are tax deductions that can decrease the amount you owe the IRS. Even if photography accounts for a small percentage of your income, the costs of running your business can be used to offset that income.
If you wish to take advantage of every possible tax deduction, it’s essential to keep records that are complete and well organized. That thought might be daunting, so here are ten suggestions for which expenses are important to document:
1: Keep track of everything you earn as a photographer, no matter how small the amount. Failure to report your income accurately to the IRS can cause you serious legal trouble.
2: Make records of transportation expenses related to your photography business. You may choose one of two methods for deducting your vehicle expenses. One option is to calculate the amount you spent maintaining and operating your car for that year. Then, figure out the percentage of the time you used the car for your business. You may deduct a percentage of the cost of operating your vehicle in proportion to the amount you used it for business. The other option is to record your business-related mileage and calculate a deduction based on the per-mile rate allowed by the government.
3: When you travel for business, keep track of how many days you were on the road and deduct the standard per diem rate established by the IRS for that year. Or, you may keep records of your actual expenses and deduct that amount.
4: You are entitled to a home office deduction if you do business out of your home. To figure out the amount of your deduction, calculate the cost of maintaining your home, including mortgage or rent, insurance, and utility bills. Then, calculate what percentage of your home is used exclusively for your photography business to determine what percentage of your housing expenses you may deduct. If you have another place of business, such as a photography studio, you can’t deduct that expense as well.
5: Your phone line might be deductible if you have a line that is used exclusively for business. Keep records of long distance business calls, as those expenses may be deducted.
6: Do you attend workshops or seminars to improve your photography skills or your business skills? If so, those costs are deductible.
7: Part of your Internet costs are deductible if you use your computer for your business. However, you may only deduct a portion of those costs if you also use your computer for personal matters.
8: Photography equipment can be expensive, but you can deduct those costs. Be sure to save all of your receipts for equipment, photography backdrops and other items related to your business.
9: When a piece of business equipment is expected to last more than a year, such as a camera or a computer, you must take into consideration the annual depreciation of the item when taking a deduction. This means you can only deduct a portion of the item’s cost each year for the expected life of the item. Keep careful records of the purchase date of each item along with its depreciation schedule when determining how much you can deduct per year.
10: Finally, the costs of hiring an attorney or an accountant for your business are deductible. Keep careful records of these expenses, including invoices from the professionals who provide these services to your business.
The thought of keeping meticulous records can be intimidating, but it’s essential if you wish to save as much as possible!