Taxes: Equipment Expenses at DVinfo.net
DV Info Net

Go Back   DV Info Net > And Now, For Something Completely Different... > Taking Care of Business

Taking Care of Business
The pen and paper aspects of DV -- put it in writing!

Reply
 
Thread Tools Search this Thread
Old April 25th, 2011, 08:26 AM   #1
Inner Circle
 
Join Date: May 2004
Location: USA
Posts: 2,994
Taxes: Equipment Expenses

Can someone explain the proper method to deduct equipment expenses? I think I've been doing it wrong. When I buy anything business related, I save the receipt and claim the cost in schedule C. If I ever sell the item then I report it as income. I've learned from a friend I should use depreciation. So if I bought a $5,000 camera I would deduct a certain amount off each year until all of the value has been deducted. But that raises a lot of questions:

1. How do you know how much to deduct each year or does it matter?

2. If you sell it how is the money reported?
What do you do if the sale price is either more or less than the amount you have depreciated it?

3. How do you handle small to medium purchases?
Lets say you buy $10 extension cord are you going go to the trouble of depreciating it? What about a computer hard drive $60. What is the threshold for equipment purchases?
Pete Cofrancesco is offline   Reply With Quote
Old April 25th, 2011, 11:32 AM   #2
Inner Circle
 
Join Date: Nov 2005
Location: Elk Grove CA
Posts: 6,838
Re: Taxes: Equipment Expenses

I am not a tax accounting expert, but I slept at a Holiday Inn last night, so take this with a grain of salt.....

In equipment puchases, you do not claim as an expense. Traditional tax treatment is to deduct the annualized depreciation of the item, over its expected life. Then when it is sold, or disposed of any recapture of the deducted amount or additional cost would be calculated. However, years ago, to help spur the economy, Congress enacted a way of expensing of all the current price of an item. This was called a a 179 deduction method. Over the years, the amount of purchases that could be deducted was increased dramatically. I seem to remember something saying that it was in the million dollar area now, so it shouldn't be an issue to most of us. The idea is that you can deduct 100% of the purchase price of your item. If there is a residual value at the end of life, or when the item goes out of service, you would have to recalculate, and recapture a portion of the deducted amount.

So technically, you may have been on point, but the question remains did you declare in properly in your tax documentation. If you use tax preparation software, most equipment should be expensed through the depreciation portion of the software, in which you will eventually be given the choice to expense the entire amount through the 179 deduction.

There are also other requirement to follow in depreciation analysis. There is always the question of "listed property".... ie., property that the IRS knows has double uses, like cameras, monitors, computers, etc. In those situation you have to state percentage of business use, as part of the analysis. I know it raises flags with the IRS.

And yes, technically, an extension cord would probably be considered equipment, as a opposed to an expense item.
__________________
Chris J. Barcellos
Chris Barcellos is offline   Reply With Quote
Old April 25th, 2011, 12:23 PM   #3
Inner Circle
 
Join Date: May 2004
Location: USA
Posts: 2,994
Re: Taxes: Equipment Expenses

I don't think it was listed on the proper form. I didn't pay attention to what forms my online software was plugging my answers into. I skipped over the depreciation section and listed it in a custom expense category called equipment. I can't go back and change how expense were filed in previous years but I'd like to do it the accepted way going forward so I don't get flagged for an audit.

There are many things they are in between equipment and supplies. Take for example memory cards for tapes camera. Are they equipment or supply?
Pete Cofrancesco is offline   Reply With Quote
Old April 25th, 2011, 03:04 PM   #4
Major Player
 
Join Date: Jul 2002
Location: Juneau, AK
Posts: 814
Re: Taxes: Equipment Expenses

I have ALWAYS used the section 179 to write off the entire purchase
price of gear. It just makes it easier for me. I have a hard
enough time doing my taxes (as I do them myself). If I had to
go back 10 YEARS and keep track of expenses that I had back then, and
calculate depreciation percentages.....I shudder to think of it.
I just save receipts of business equipment, write them off as a
section 179 expense, and be done with it!
Gabe Strong is offline   Reply With Quote
Old April 25th, 2011, 03:59 PM   #5
Inner Circle
 
Join Date: Mar 2005
Location: Hamilton, Ontario, Canada
Posts: 5,742
Re: Taxes: Equipment Expenses

I hate to say it, but questions such as these are why anyone in business MUST have an accountant. Don't even think of trying DIY on this stuff.
__________________
Good news, Cousins! This week's chocolate ration is 15 grams!
Steve House is offline   Reply With Quote
Old April 25th, 2011, 04:15 PM   #6
Inner Circle
 
Join Date: Nov 2005
Location: Elk Grove CA
Posts: 6,838
Re: Taxes: Equipment Expenses

Quote:
Originally Posted by Gabe Strong View Post
I have ALWAYS used the section 179 to write off the entire purchase
price of gear. It just makes it easier for me. I have a hard
enough time doing my taxes (as I do them myself). If I had to
go back 10 YEARS and keep track of expenses that I had back then, and
calculate depreciation percentages.....I shudder to think of it.
I just save receipts of business equipment, write them off as a
section 179 expense, and be done with it!
Nice thing about most tax software you buy each year is it will carry everything forward automatically, as long as you keep the previous years file to load into the new year.

Check this article out on recapture issue when you use section 179 deduction:

SUV Tax Deduction - Section 179 Pitfalls
__________________
Chris J. Barcellos
Chris Barcellos is offline   Reply With Quote
Old April 25th, 2011, 04:22 PM   #7
Regular Crew
 
Join Date: May 2005
Location: NJ
Posts: 60
Re: Taxes: Equipment Expenses

Quote:
Originally Posted by Steve House View Post
I hate to say it, but questions such as these are why anyone in business MUST have an accountant. Don't even think of trying DIY on this stuff.
Amen to that Steve. I've used my account for years and now that I'm freelancing and trying to start a business, I could not live without his "accounting skills" if you know what I mean.
Shawn D. Caple is offline   Reply With Quote
Old April 25th, 2011, 04:27 PM   #8
Inner Circle
 
Join Date: Jan 2003
Location: Chicago, IL
Posts: 6,609
Re: Taxes: Equipment Expenses

I have to agree with Steve on this. when one has their own business, be it a brick and mortar or working from the spare bedroom of your apartment or house there are tax implications to everything. I speaking of in the USA as I do not know about other countries.
The absolute best advice I got, back in 1971 when I first go into freelance photography and work as an independent contractor (not a well used term back then), was this "get a good lawyer and a great accountant". Best advice ever. What ever I have paid my accountants over the years I have either gotten it back or at least saved that and more by using them. Do not be penny wise and dollar foolish, get a good accountant. Remember it's only expensive if it doesn't work. (True of products and or services)

Just my $.03 worth (adjusted for inflation and $4.27 per gallon gas)

O|O
\--/
__________________
What do I know? I'm just a video-O-grafer.
Don
Don Bloom is offline   Reply With Quote
Old April 25th, 2011, 06:05 PM   #9
Inner Circle
 
Join Date: Sep 2002
Location: Vancouver, British Columbia (formerly Winnipeg, Manitoba) Canada
Posts: 4,088
Re: Taxes: Equipment Expenses

Quote:
Originally Posted by Don Bloom View Post
What ever I have paid my accountants over the years I have either gotten it back or at least saved that and more by using them. Do not be penny wise and dollar foolish, get a good accountant.
I'll echo what Steve and Don have said...

Having an accountant is NOT optional, unless you ARE an accountant.

My accountant has saved me MANY thousands of dollars at a cost of about $800 a year. And I do LITTLE to prepare except split my receipts into broad categories.

Thus endeth the sermon.
__________________
Shaun C. Roemich Road Dog Media - Vancouver, BC - Videographer - Webcaster
www.roaddogmedia.ca Blog: http://roaddogmedia.wordpress.com/
Shaun Roemich is offline   Reply With Quote
Old April 25th, 2011, 07:57 PM   #10
Inner Circle
 
Join Date: Jan 2003
Location: Chicago, IL
Posts: 6,609
Re: Taxes: Equipment Expenses

Hey Shaun, good to "see" you again.
Wow you're a nice guy, I give my acountant a shoebox or big envelope filled with receipts. Maybe he'd charge me less if I seperated them.

O|O
\--/
__________________
What do I know? I'm just a video-O-grafer.
Don
Don Bloom is offline   Reply With Quote
Old April 25th, 2011, 09:05 PM   #11
Major Player
 
Join Date: Jul 2002
Location: Juneau, AK
Posts: 814
Re: Taxes: Equipment Expenses

Quote:
Originally Posted by Chris Barcellos View Post
Nice thing about most tax software you buy each year is it will carry everything forward automatically, as long as you keep the previous years file to load into the new year.

Check this article out on recapture issue when you use section 179 deduction:

SUV Tax Deduction - Section 179 Pitfalls
Yeah, well, the nice thing for me is that I almost NEVER use my business
gear for personal use. If I buy a video camera or steadicam or
light kit, or edit software, or anything that I actually write off....
I use it for my business. Period, end of discussion. So for ME, the
section 179 expense works. For many others, it may not. I try
and really keep my business and personal stuff separate.....I have
a 'handycam' camcorder for shooting the kids and such that I do NOT
write off as a business expense, even though I do use it for my
business sometimes......but because I also use it for personal use,
I did not count it as a business expense.

However, I have noticed that you are exactly right. My tax software does
exactly what you are talking about which is AMAZING. However, there
are a couple state law reasons that still benefit me to use a section 179
expense. For example, 'depreciation' is NOT considered a legitimate
business expense by certain departments in my state when figuring out my
total business income. Don't ask me why, as they could not explain it to me,
but that's the way it is.
Gabe Strong is offline   Reply
Reply

DV Info Net refers all where-to-buy and where-to-rent questions exclusively to these trusted full line dealers and rental houses...

B&H Photo Video
(866) 521-7381
New York, NY USA

Scan Computers Int. Ltd.
+44 0871-472-4747
Bolton, Lancashire UK


DV Info Net also encourages you to support local businesses and buy from an authorized dealer in your neighborhood.
  You are here: DV Info Net > And Now, For Something Completely Different... > Taking Care of Business

Thread Tools Search this Thread
Search this Thread:

Advanced Search

 



All times are GMT -6. The time now is 12:45 AM.


DV Info Net -- Real Names, Real People, Real Info!
1998-2024 The Digital Video Information Network