Writing off used equipment?

Antithesis · Apr 30, 2008

I'm going to be filing my DBA and all my LLC paperwork so I can start writing things off and actually doing business. I'm curious, when writing off equipment that you use for work, can you write off equipment that you purchased used (just stuff I'm not going to be totally reliant on, I have a pretty strict budget to start with of about ~$4000)?

Also, after talking to my mom (an avid entrepeneur), I discovered how strict some regulations are on the usage of a home office, etc. Does equipment that you purchase for business use have to be used for business only? If I go out and shoot some landscapes with the same camera I wrote off for shooting weddings, am I technically breaking the law?

Sorry for all the questions, I'm just getting everything together to have a legitimate business for shooting weddings. I'm reading a lot, but some questions just have to be asked.

Rhys · Apr 30, 2008

Here, in SC, you can only write off stuff purchased during that tax year.

So if your camera was purchased on December 31st 2006 then it cannot be in your 2007 taxes (which should have been submitted January 2008).

You can write off anything you purchase for the business.

I believe DBA for home businesses has been exploited by people buying stuff for their hobbies. Getting a business licence is essential to DBA.

You need to see an accountant rather than relying upon word of mouth from the web where people responding couple be spotty teens or al-quaida members trying to cause problems.

Antithesis · Apr 30, 2008

Yeah, I just picked up a few basic business law books I need to pore over.

I was under the impression that DBA could be acquired through state regardless if the business is started yet, simply for the purpose of reserving a name. I am going to get a business license soon, I was just hoping to get my DBA filed by the end of this week.

Yeah, there are just a few pro's on here that can answer some of the sillier questions about the business. Hopefully they aren't pimply al-queda kids

Rhys · Apr 30, 2008

When I applied for my business licence, it was the first thing I did. When that arrived, I ordered my signs etc.

Aggressor · May 1, 2008

If you purchased it used, you can only write it off if you have a receipt as that is the only thing that can prove the amount you are writing off and for which fiscal year you purchased it in should you ever be audited.

As for using your camera for other purposes -- if you are a wedding photographer and you use your camera for landscapes, it could be for your professional development, so no, you are not breaking the law.

Even for taking family/vacation pictures where the only client is yourself, you
will likely be experimenting on techniques that will improve your work in your field. This still can support your professional development.

However, if you still feel that it is "wrong" you can determine the
percentage of business/personal use and apply that to the purchase price of your business expense. Before you do that I would advise you to do these first:

1) Read this article, especially the two points below: http://www.businessweek.com/magazine/content/05_07/b3920114_mz070.htm

[FONT=arial,helvetica,univers]Q: What's the mindset self-employed taxpayers need to adopt?
A: Look at everything that you do as a possible business connection and define your business as broadly as you can. You might define what you do as tech consulting rather than computer repair. If you're a writer who's a generalist, you can write off a lot more than if you wrote only about sports.

Q: The IRS says an expense must be "ordinary and necessary." What does that really mean?
A: The IRS defines necessary as "appropriate and helpful." What counts as ordinary? If a computer-game developer buys other people's games, that's an ordinary expense to him. It's not an ordinary expense for me unless I'm writing and have the potential to write about computers or what effect computer games have on the brain.

2) Consult your accountant as tax laws vary from state to state & country to country.
[/FONT]

Big Mike · May 1, 2008

The laws & rules may be different, depending on your city, state, country etc....so you really need to talk to someone local, probably an accountant.

In my area, I believe you can write off used equipment or even equipment that you owned prior to starting your business...but you must do it at 'Fair Market Value'. For example, if you bought your camera new, three years ago...you couldn't buy it into your business at the price you paid for it. It would need to be depreciated (there is probably a standard formula for this).

As for personal use of your gear (or home office etc), the rules probably have something to do with the percentage of time it's used for personal or business use.

Chances are that if you have a small/home business and are writing a bunch of stuff off...that you will be audited...so keep your paperwork in order. I'd suggest using an accountant...after all, you can write that off as well.

Rhys · May 1, 2008

Depreciation is great. I can depreciate my stuff by up to 90% each year. That means my business personal property tax is minimal. I think it's under $10 this year.