Writing off purchases
Hey guys,
I have a question about buying new gear. I have several musician friends that tell me that I should guy all of this gear, not worry about the cost because I can just write it off at the end of year and get that money back. Since this is a business and I do get money from some projects- this seemed like a great possibility. However when I spoke with my financial advisor (who doesn't do tax work, but mainly IRA Roths and such) he said he didn't think that was legal. He wasn't completely sure though- since it's not his area of expertease.
The way its been explained to me is:
You can write off purchases for musical gear and supplies only if that dollar amount is less than what you made. For example, I would be able to write off a 500 dollar purchase if my total income for that business was 1000 dollars. I was told that I would not be able to write something off if the price exceeded my yearly income.
When I've told this to other musicians- they say thats incorrect. I'd just like to know what I can do legally. If I can write off this gear- then I'll upgrade my tools before the end of the year. If I can not, then I'll wait to I've saved up enough cash.
One thing is definitely true- I wish music gear was really cheap!!!
Thanks,
Considering I own a company and write expenses off quarterly I can tell you that your friends are either utter bullshit, or they didn't explain it to you properly.
Writing off an expense is a tax break... simple as that. So put it this way:
- Let's say you make an income of $60,000
- During said year you purchased $2,500 of business expenses
Does this mean you get a free $2000? Hardly. It means that you don't have to pay tax on the actual business expense. So basically in the end instead of paying tax on $60,000 you will be paying tax on $57,000.
A lot of people talk about 'write-offs' and this and that just to sound cool, but they have no idea what they are talking about. So basically after making your purchase of $2,500 you will get a tax credit for a couple hundred. Now this is also assuming that you have a registered business and you aren't just calling it a business.
That is also the reason that you can't write something off that exceeded your income for the year. I mean if you made $60,000 but spent $70,000 on expenses there is no such thing as -$10,000 income tax... it will simply be 0.
Writing off an expense is a tax break... simple as that. So put it this way:
- Let's say you make an income of $60,000
- During said year you purchased $2,500 of business expenses
Does this mean you get a free $2000? Hardly. It means that you don't have to pay tax on the actual business expense. So basically in the end instead of paying tax on $60,000 you will be paying tax on $57,000.
A lot of people talk about 'write-offs' and this and that just to sound cool, but they have no idea what they are talking about. So basically after making your purchase of $2,500 you will get a tax credit for a couple hundred. Now this is also assuming that you have a registered business and you aren't just calling it a business.
That is also the reason that you can't write something off that exceeded your income for the year. I mean if you made $60,000 but spent $70,000 on expenses there is no such thing as -$10,000 income tax... it will simply be 0.
You may have to prove it's towards your business. Other than that, as an audio engineer you can write off ANY KIND OF ENTERTAINMENT. Really, CD's, Movies, Concerts, and especially gear. CD's and such constitute as research.
I'm serious. Save all your receipts. Think small and it adds up. If it goes towards your business you can write it off. Blank CD's, cables, furniture. And yeah, the write off works like Saruman said.
Tony
I'm serious. Save all your receipts. Think small and it adds up. If it goes towards your business you can write it off. Blank CD's, cables, furniture. And yeah, the write off works like Saruman said.
Tony
Also save your receipts so you can deduct sales tax (in states that have it). Don't get taxed twice.
This year I'm writing off a Canon EOS 350D, a Wacom Intuos3 6x11 and, hopefully, a MacBook and one or more PCs. I keep all of my receipts in a big box, sorted by month. I'll be doing my taxes early for once... [smile]
This year I'm writing off a Canon EOS 350D, a Wacom Intuos3 6x11 and, hopefully, a MacBook and one or more PCs. I keep all of my receipts in a big box, sorted by month. I'll be doing my taxes early for once... [smile]
I have my taxes proffesionally done last year. I teach private guitar lessons for a living and I was able to write all my gear off that I could somehow relate to my career...I am under the impression you can get money back if you spend more than you make that year. There is a term for this like reporting a loss or something. My dad used to own a welding company and is familiar with all of this Im just recalling what he/tax preparer said. I only got depriciated value for these items since they werent brand new. It's complicated and I have only done this for one year but the bottom line as I understand it is you can write the gear off but unless a proffesional tax preparer tells you otherwise dont buy something thinking the IRS will completly pay for it, thats not how the system is intended to work.
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