Deducting my camera on income tax

[kevin_b.2]

<p>Ok heres the deal, bought a $2000 camera online. Didn't pay sales tax (obviously) however if I claim this $2000 camera as a business expense (yes I have a business ID) I am pretty sure I will be required to pay the "use" tax on it. Which ends up being the same as sales tax. <br>

So... do I deduct it or not. Which is the better option. Which will end up saving me more money.</p>

[Charles_Webster]

<p>Ask your accountant.</p>

<p>Any financial advice you receive on the 'net is worth exactly what you pay for it.</p>

<p><Chas></p>

[john tonai]

<p>So are you planning to keep two sets of books? For the few bucks you will save, it seems like a slippery slope.</p>

[kevin_b.2]

<p>I am small small business. So I file it under my personal income tax. A joint thing.</p>

[craig_gillette]

<p>It does seem likely that if you try to deduct an item for your business, it's going to suggest the need to pay sales or use taxes on it. Unless it's for resale, of course. Agree, it's probably a really good idea to work with your accountant on this.</p>

[Charles_Webster]

<p>I'm not an accountant, but $2K seems like a capital expenditure that should be depreciated rather than an expense to be deducted.</p>

<p>But I'm not an accountant.</p>

<p><Chas><br /><br /></p>

[photomark]

I think the only way to know which is cheaper is to do the math and compare. Without knowing your particulars—income,

state and local tax rates, etc. I don't know how anyone can answer your question. As a general rule though, my advice is if

you are going to start filing business expenses, come clean on everything. If you are supposed to pay a use tax, and there

is no aboveboard way to avoid it, pay a use tax. It's worth the peace of mind.

 

In response to Chas' deduction/depreciation response, what I generally do with camera and computer gear is use the

section 179 deduction to write it off in one year. There is a limit to how much you can write off, but it's high enough for the

occasional computer/camera — $250K I think. (Like most everyone else here, I'm not an accountant)

[mart_e]

<blockquote>

<p>I'm not an accountant, but $2K seems like a capital expenditure that should be depreciated rather than an expense to be deducted.<br>

But I'm not an accountant.</p>

</blockquote>

<p>That would be the case here in UK - you can't offset it entirely as you would an expense, it is a capital cost, and at best you could set 40% of it's value in the first year, and 25% of the remaining in each following year. If it is a cost from outside of your business, ie something you are bringing into it, it would only be 25% in first and subsequent years.</p>

<p>That is UK though - and I'm not an accountant :) - I suspect that principals are similar in US ?</p>

<p>Martin</p>

[peter_mounier]

<p>Pay the use tax, maybe some of it will make its way to the education budget.<br /> Why are people so self righteous about using (stealing) pirated software, and so bent out of shape when their images are used by another without permission, but the have no qualms, and even ask for advise on how to steal from the govt.? <br /> I don't agree with much of what govts. do, but sales and use taxes go into the state budget, which isn't so militaristic.</p>

<p>Peter</p>

[mikael_karlsson]

<p>I agree with Peter. Also, the penalties and interest charged if you get audited can be quite stiff. Plus that you still owe the tax itself of course. Then there's the likelihood that you'll be watched very closely for many years if they audit you once and find you're not playing by the rules. State tax gov't also often are buddies with the IRS so you might find yourself having to go through many years of filed returns with your friendly IRS agent...<br /><br />As have been pointed out previously, sale/use tax is most often used to fund state and local things most of us wouldn't like to be without. Here it funds (to some extent) state and local law enforcement, fire departments, state parks (where many of us like to photograph), weights and measures (to make sure you're really getting a gallon of gas when you're at the pump and the pump says you have and to make sure the grocery store scales aren't off etc), foster care and much more.<br /><br />Just MHO. Then again, since I'm Swedish by birth I guess I'm slightly biased in favor of paying taxes owed and the fact that the Wife works for the state department of revenue here might add to that just slightly...;-)</p>

[john_lynch5]

<p>Under most, if not all, states' laws, you are required to pay the use tax whether you deduct the purchase as a business expense or not. However, in some states, the purchase may be exempt from sales or use tax if is used in the production of goods or services for sale. Here in Texas, for example, if you have legitimate photography business, the camera would be exempt from use tax since it is used for the production of photographs which will be sold. You need to discuss your situation with an accountant in your area because every state is different when it cames to sales and use tax. (I am an accountant.)</p>

[henryp]

<p>To add to the other "pay the use tax" bits of advice, it's worth a reminder that you sign your tax forms under penalty of perjury. So if they catch you, you'll owe the tax plus interest and penalty and could be accused of both tax evasion and perjury. Not part of my life plan. YMMV.</p>

<p>Henry Posner<br /><strong>B&H Photo-Video</strong></p>

[daverhaas]

<p>Typically use tax is charged whether you deduct for business or not...it's just that 99% of the population (those who aren't business owners) aren't aware of it - and for the most part states (surprisingly) aren't really pursuing people that make purchases via the web "tax free"...<br>

Now if you are a business - then it's a different story.</p>

 

[colin_mattson1]

<blockquote>

<p>I'm not an accountant, but $2K seems like a capital expenditure that should be depreciated rather than an expense to be deducted.</p>

</blockquote>

<p>The problem is it's then depreciated over 5 years, which is a much longer period than the useful life of the camera. Some people, as Mark mentioned, prefer to deduct the whole thing at once under Section 179 for that reason. There are pros and cons and limitations to both methods, and anyone curious about this should talk to a knowledgeable accountant (which I also am not).</p>

[jaybee]

<p>I am a tax accountant who works almost exclusively with individuals and small businesses. Charles Webster's first answer is the most accurate one posted so far. Henry Posner's point about perjury is also an answer to heed.</p>

<p>Joel</p>

[markci]

<p>You can expense capital equipment in a single year, no problem. The limit is over 100 grand. I've expensed basically every computer and business-related piece of software I've ever bought. On the other hand, if for some reason you're not anticipating a profit this year anyway, you'll want to depreciate it.</p>

[kelly_flanigan1]

<p> The States and Feds can have different capital equipment depreciation schedules. </p>

<p>Thus the Feds might let you write off a 5k item one year; but you have to do it over 1, X, Y or Z years your state returns.<br>

<br /><br>

EACH STATE HAS different rules; if one is a dumb assuming type; one can get in trouble.<br>

<br /><br>

In some states all that stuff one took off in one year has to be taken off over a few to many years; depending on the equipment *type* and classification and if you have a sweet heart deal to lure in a new business; or a minority or tribe or you are in a disaster area (ie earthquake/tornado/hurricane) . </p>

<p>Thus a foam core /paper shear that cost 3 grand might go off in 1 year on Fed; but require 10 years in state A; 20 years in state B; 5 years in state C; or is just 1 year in state D. </p>

<p>The state bean counters in state B think the shear has a long life; thus 20 years. One has maybe a straight line or sum years digits table to fart around with for a decade or two. If the business goes away they may want to know where your stuff is. If one is in a disaster zone; the state may let one take it off radically quicker. If you think it is the same as the feds rules; you are a foolish; as dumb as accountant thinking there is only one 50mm lens ever made in Leica Thread mount. <br>

<br /><br>

If one deducts stuff on ones state taxes; all your stuff is there to check for usage tax payage. </p>

<p>If you are a small fry taking off a lot of stuff in one year and one has not much income; IRS/State's red flag rises somewhat pointing to a HOBBY; ie one is going the hobby gambit.</p>