Just because the holiday shopping season is over doesn’t mean you won’t want to buy more photo equipment, especially if you’re a professional photographer. Tiffany J. Morisue is a CPA & Small Business Adviser and a professional photographer, and she just happens to be teaching a class on taxes and starting your own photo business for us in March. She was kind enough to write a short article detailing why you might want to buy some photo equipment before the new year if you’re a professional photographer. Here’s Tiffany:
As the holiday season comes to a close, another season is about to begin – tax season!
When it comes to income taxes, it’s all about timing. And when I say timing, I don’t just mean the deadlines to file your returns and make payments.
If you’re a cash basis taxpayer, meaning that you recognize revenue when money is received and expenses when they are actually paid, timing is everything. On the flip side, accrual basis taxpayers recognize income when it is earned, regardless of when the money is received, and expenses when they are incurred, regardless of when they’re paid. Let’s focus on what most of you reading this article are — cash basis taxpayers.
In a nutshell, two things that you can do to reduce your taxable bottom line is to defer income and accelerate deductible expenses. One example of deferring income is doing your final billings to clients in late December so that the money is not received (and thus not recognized) until January. As far as recognizing income based on receipt, it means just that, when received. So, payments received in late December are counted as income for 2013 even though you don’t make the deposit to your bank account until January.
When it comes to accelerating deductible expenses, you can do things as simple as purchasing needed supplies and making payments that are due in January in December instead. You can also purchase needed equipment by year end. Thanks to the federal (IRS) Section 179 deduction, you may be able to deduct all or most of your year-end equipment purchases on your 2013 tax return in lieu of only recognizing a portion of the expense over a number of years (standard depreciation deduction). Of course, as with all tax rules, limitations and exceptions may apply, so it’s best to consult with your tax adviser to get advice specific to your situation.
So, take a look at your upcoming supply and equipment needs. Midwest Photo Exchange is a great place to pick up many of the things that may be on your list!