I have a photography business.
This is how I understand that it works: If I earn 2k with my business, and purchase a lens for 2k - I'm golden. I can deduct it, and it counts as no income.
However, if the item was worth more than 2.5k, I can only depreciate it - so I'll be paying tax on it up front. (Much of my camera gear will costs over 2.5k per item, so this concerns me.)
Also, if I use that lens for personal use 50% of the time, I can deduct only 50% of it. Thus, I owe tax on 50% (1k). Therefore, 1k is counted as personal income. Is this correct?
Is there any way of having business income / expenses etc. reside with the business - that is, the business pays the tax owed, and it's not counted as personal income?
Also, what happens if I deduct everything (say I get a dozens lenses for 2k each, count them as expenses so I owe nothing) and later disband the business? I assume I pay tax as though personal income?
It's vitally important to me, because I'm disabled; I can work only sporadically. And if my business income counts as personal income because I had to depreciate rather than deduct, then effectively I'll be paying for it twice: my housing assistance, disability check, etc. will drop almost an equal amount - and I won't have the funds to pay those things on my own. In addition, I'd lose my medicaid coverage (medical bills would sink me.)
This is how I understand that it works: If I earn 2k with my business, and purchase a lens for 2k - I'm golden. I can deduct it, and it counts as no income.
However, if the item was worth more than 2.5k, I can only depreciate it - so I'll be paying tax on it up front. (Much of my camera gear will costs over 2.5k per item, so this concerns me.)
Also, if I use that lens for personal use 50% of the time, I can deduct only 50% of it. Thus, I owe tax on 50% (1k). Therefore, 1k is counted as personal income. Is this correct?
Is there any way of having business income / expenses etc. reside with the business - that is, the business pays the tax owed, and it's not counted as personal income?
Also, what happens if I deduct everything (say I get a dozens lenses for 2k each, count them as expenses so I owe nothing) and later disband the business? I assume I pay tax as though personal income?
It's vitally important to me, because I'm disabled; I can work only sporadically. And if my business income counts as personal income because I had to depreciate rather than deduct, then effectively I'll be paying for it twice: my housing assistance, disability check, etc. will drop almost an equal amount - and I won't have the funds to pay those things on my own. In addition, I'd lose my medicaid coverage (medical bills would sink me.)
Federal Taxes: When is Business Income Counted As Personal Income Can Large Items Be Deducted
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