You likely fell in love with photography and began collecting cameras, drones, and software long before it became a profitable business. But now that you’re a professional photographer working for yourself, many of these things can now be deducted from your income taxes. When your job is your passion, it can be a fine line between what’s purchased purely for business. However, if you take a closer look at these 5 expense categories, you’ll be surprised how much you can save come tax time!
It’s important to note, here, that earning $500 to take your cousin’s senior photos does not necessarily qualify you as a professional photographer in the eyes of the IRS. Technically, if you’re going to claim something as a business expense, you have to prove that you’ve generated enough revenue to justify the expense. So if you earned $1,000 last year, you likely won’t be able to claim a $1,500 camera as a business expense. As with most tax-related expenses, the better records you keep, the easier it will be both to claim the correct amount and prove how much you spent and earned.
1) Capital Expenses
As long as you’ll use it for more than one year, you can claim most of your equipment as a capital expense. This is valuable as photography equipment can be quite expensive and require a significant investment. Experienced professional photographers say to typically budget around $10,000 to start your own photography business. Some of the most commonly claimed pieces of equipment include
- Light boxes
- Hard drives
In order to deduct all the upfront costs at once, your photography business must be in its first year, and you need to use the Section 179 deduction. You can also claim a portion of your capital expenses over a several-year period if you don’t qualify for the Section 179 deduction. The good news is there is no dollar minimum to the items you can deduct, so even things like lens caps and camera chargers count as business expenses.
2) Venue Expenses
Some photographers prefer to rent a space for photo shoots or equipment storage rather than use their home. While lease prices for spaces will range depending on what part of the country you live in, you can expect to start at $50 per square foot for a shooting space. There are also some places you can rent a studio by the hour if you’re willing to work on a tight schedule. Especially if space is an issue or you are concerned about having strangers in your house, it can be a better business decision to rent a space and claim it as a tax deduction. Some things associated with venue expenses are:
- Storage space for props
- Studio space for shooting
- Electricity costs
- Internet services
In the event you do use your home for photo shoots or storage, you may be able to deduct part of your mortgage interest, utilities and even maintenance according to Publication 587. Typically the amount you can deduct is proportional to the space taken up solely by business. So if you have a dark room, for example, that takes up 5% of your house, you may be able to deduct 5% of your rent, utilities, or mortgage, as well as the cost of maintaining the equipment specific to the room.
3) Educational Expenses
If you take post-secondary photography classes, it is generally better to claim the education tax credits than to claim them as a business expense. However, there are other costs associated with staying current on techniques and equipment that you can deduct. Some of them you might not have thought of include:
- Trade magazine subscriptions
- Software licenses
- Membership fees for business associations
- Specialized courses
Attending a specialized course, seminar or workshop typically involves paying a tuition fee, travel expenses and sometimes lodging costs. Local workshops can cost a few hundred dollars, but the more advanced workshops can cost between $1,000 and $8,000 per person. These can also be deducted in most cases. If you are taking courses to become eligible for a new job, you can’t count those as a deduction, only classes that improve your photography skills.
4) Travel Expenses
Were you the photographer for a destination wedding? Do you drive to state parks or other more remote locations for photo shoots? Travel costs can add up quickly. So can the wear and tear on your vehicle. While many photographers know car mileage can be deducted, many are unaware maintenance on your vehicle can also be claimed. Other deductible travel expenses are:
- Portions of a new car purchase
- Auto repairs
- Bus or train tickets
To accurately deduct your mileage, it is helpful to either write down the miles on your vehicle at the beginning and end of each work-related trip. There are also apps like Everlance, which track your mileage, and allow you to sort out whether your trips were for business or pleasure, so you don’t have to deal with the paperwork.
5) Insurance Expenses
Another deduction not many independent professionals take advantage of is business insurance. Storing props in your basement or dedicating a space to use as a home office for editing pictures means your business could suffer a huge loss in the event of a fire, break in, flooding or other tragedy. Business insurance protects you against property damages such as these as well as lost business income, lawsuits and other liabilities. For example, did you know you can be sued for taking “unflattering” photos?
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Despite all the benefits of having business insurance, less than 30 percent of small business owners have it. Most people with their own business have urgent needs for capital elsewhere and don’t see business insurance as a priority. The good news is business insurance premiums can be deducted, so it ends up being much cheaper than you might think. You can also claim other types of insurance, such as the following:
- Auto insurance
- Renters insurance
- Homeowners insurance
Regardless of the size of your photography business, if it is your primary source of income it is worth protecting. Especially since the most common losses come from unexpected circumstances you won’t have time to plan for. If you have questions about which type of insurance is right for your business, reach out to Bunker’s insurance advisors anytime for free guidance. Bunker can help you tailor your insurance coverage to short term contracts, or find ongoing policies to protect your business year round.
Get a policy you can afford, for the length you desire – and don’t forget to deduct it from your taxes this year!
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Have other friends making moves as independent professionals? Make sure they know about the tax deductions available to them!