Tax Guide For Photographers

Tax Guide For Photographers

Its that time of year, the dreaded tax season. During this time, we all either hire someone to do this work for us, or we spend hours on websites trying to decoded the complicated tax laws that apply for us all. This can be a painful process, especially for us self employed photographers. Well, I'm here to help you dig through the complicated process, and simplify your taxes into some terms you may be able to understand.

As for who I am, I've been doing taxes professionally for the past five years. I am a registered Tax Specialist, and a registered ERO through the IRS. During this time, I have done over 2000 individuals income taxes, attended dozens of tax seminars, and completed hundreds of hours of training.

This guide is meant to be a basic guide for photographers who are completing their taxes. Certainly, I’m not able to contain hundreds of hours of training and years of experience into a simple article, so please take all of this as advice, and not as a complete guide to completing your taxes.

This also only covers federal returns, as I’m not able to go through state by state and tell you each credit available for your very specific situation. If you’re looking for something that will contain the state level credits for your return, please contact a local Tax Specialist, CPA, or Enrolled Agent. They’ll be able to help your specific needs.

Also, if you’re looking for a more complete guideline, I recommend checking out Fstoppers “How To Become A Professional Commercial Wedding Photographer DVD”. In the DVD, they spend hours talking about taxes, and give you a complete understanding of the process.

The Forms

When completing a tax return where you are self employed, such as a photographer, you’ll want to use the following tax forms.

1040

1040Form

This is your basic tax form that everyone will use (1040EZ/1040A applies for those with very basic returns). On this, you’ll put your gross income, your deductions, and your basic tax credits. You need to fill out one of these in order to complete a tax return. Consider this your table of contents for your tax return.

 

Schedule C

ScheduleC

A schedule C is your basic form that you use to complete a self employment tax return. On this form, you’ll put your income made from photography, as well as deductions in your business, such as advertising, rent, utilities, insurance and so on. This is the basic form that most everyone who is claiming income from their business will use.

 

Schedule SE
This is the form that is used to calculate your social security and medicare taxes for the end of the year. It must be accompanied with the Schedule C in order to file your taxes correctly.

 

Form 2106
Form 2106 is business expenses, specifically, mileage for your travelling. There are two different ways to fill out this form, either using standard mileage (Section B), or Actual Expenses (Section C). In my personal experience, Standard Mileage is the most beneficial way of calculating your travel expenses, as it yields a higher deduction. Its worth noting that these expenses would go on a Schedule C is you're self employed, and on the 2106 if you're employed by another photographer who is issuing you a W2.

 

Form 8829
Form 8829 is a business use of home form issued by the IRS. On this form, you’ll write off a portion of your rent or mortgage based on the size of your home office. This goes off of a percentage ( office space square ft divided by total square ft of home).

 

Form 4562
The form 4562 is your Depreciation and Amortization paperwork. This form is used for depreciation of your equipment and other tools purchased for the year. Each piece of equipment is depreciated at a different amount of years, so you'll want to check the classification of your equipment to see what rate it depreciates at.

General Information

Basic Expenses
Basic expenses are what I'd consider the obvious expenses. These will typically go on the expenses portion of a Schedule C and are deducted from your total income made for the year to find your taxable amount of income. These include any advertising expenses you may have for your business, insurance paid, contracted labor (Hired second shooters or assistance), repairs, supplies and so forth. All of these are pretty self explanatory on what you'd need to put in each category (hence why I call them basic expenses). If you're considered self employed, this is also where your prorated mortgage/rent and utilities expenses will go for your home office or studio space.

Travel Expenses
Travel expenses are also pretty obvious. If you're traveling out of town for a conference relating to photography, you're able to write off your general travel expenses for the trip (flight, hotel, admission, etc.). An example of this would be the WPPI conference in Las Vegas, NV next week. Since this is a conference geared toward photographers, all the professional photographers traveling to it will be able to write off their expenses for the trip. This information is entered into your Travel Expenses category on your Schedule C.

Mileage Expenses
Mileage expenses are simply the expenses you'd calculate for any local traveling you've done with your vehicle. So if you must drive 30 miles in order to get to a photoshoot, you're able to write off that travel based off of a mileage rate determined by your state. The standard rate determined by the IRS for the tax year of 2012 is 56.5 cents per mile, however, often states will have a higher mileage rate to use for these expenses. Check with your state directly to see if their mileage rate is more beneficial for you to use. This is entered in your Auto category of your Schedule C.

Meal Expenses
This one is tricky, as it is typically the largest reason why the IRS will audit your business return. The IRS allows you to write off any meal expenses related to your work that is considered ordinary and necessary. This means that while you're certainly not able to write off those times you've taken your family to dinner, you are able to write off expenses related to your work. A good example of this is when you're meeting a client at a coffee shop or something similar. If it is related to your work (such as meeting a bride to discuss your wedding packages), you're able to write off your expenses during that meeting, assuming they're ordinary and necessary. You're also allowed to write off their expenses during this meeting, assuming that you paid for them as well. However, you're only able to deduct 50% of your meal expense on your Schedule C.

In addition to meal expenses, you're also able to have gift expenses. If you send holiday cards to your clients, or gifts thanking them for their business, you're able to deducted it as a gift expenses, as long as the price does not exceed $25 per client. This is filed under the category 'Supplies' on your Schedule C.

Depreciation
Photography equipment is extremely expensive, however, you're often able to write off the gear you purchase throughout the year on your taxes. This goes on the 4562 form of your tax return. As standard, lenses, camera bodies and other major photography equipment is depreciated over the course of 5 years. What this means if that you're able to write off 20% of that equipment per year for 5 years (So if you purchased a lens for $1000, you're able to write off $200 as an expense for the first 5 years of owning it.). However, with the American Taxpayer Relief Act of 2012, you're able to depreciate 50% of the full amount of an expenses the first year you own it if you'd like. There are very specific rules that apply for this tax relief, so be sure to check the IRS directly before using the Section 179 additional deduction.

 

Quarterly Payments

EstimatedTax
It's not uncommon to owe the IRS (and typically your state) if you're self employed. This is simply because while everyone else is having Federal and State taxes withheld from their paycheck, you are not. However, if you owe for multiple years, you're often being hit with an additional penalty. This penalty can be avoided by simply paying quarterly taxes to your state and the IRS. Quarterly payments can be set up by filing out your estimated tax form entitled Form 1040-ES. Quarterly payments are due on April 15, 2013, June 17, 2013, Sept. 16, 2013 and Jan. 15, 2014.

 

Conclusion

Again, this is just a basic run down of the different expenses and forums available to use for self employed photographers. If you feel over your head on this, please hire a tax professional to complete your taxes. And if you're interested in learning more, I again, recommend checking out the DVD entitled "How To Become A Professional Commercial Wedding Photographer DVD". In this DVD, Patrick and Lee spend hours talking about the different tax laws that apply specifically to photographers. As always, more information on each individual tax form is available on the IRS's website.

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15 Comments

amazing article, really helpful and appreciate you taking the time. 
Do you have any information for UK taxes? Or the best place to look?
thanks

Zach Sutton's picture

Thanks :-)

I wish I could help, Stefan...but I don't have the slightest clue on how to do UK taxes. I'd say just roam around HM Revenue's website and see what you can find. Honestly, I've never done a UK tax return, or even looked at one, so I can't help much more beyond that.

This is an awesome article, thanks so much for all the great information!

Michael Kormos's picture

Great read. It's important to understand what you can deduct and what you cannot.  Also, I believe travel that's personal and business (50/50) can still be deducted at that ratio.  Keep receipts and a log of everything.  If for whatever reason you get audited, car mileage usage needs to be documented (where you drove, when, and for what purpose), etc.

I live in Bosnia, we all cheat at taxes, so this article make non sense to me :P

Great article, thanks. Do you know of any iPhone apps that helps keep receipt and mileage tracking easy and digital?

Allison Cobb's picture

So incredibly useful right now!! I'm almost starting to stress about my taxes this year so this came at the perfect time! Thanks so much!!

If you are self-employed, tax season starts the first of the year; which means you start again to keep records of income and expenses for the year. Computer software properly set-up will do much of the work come tax preparing time, it is a matter of getting it set-up and knowing what you can and can't as well as what is allowed. If need, an accountant can set-up your books/software so all you need to do is be diligent and most of the work is preformed in software. No fun to do, but it is not always how much you make, but how much you keep. Geez, I gotta do mine yet:-(

xpense tracker is a great app for your phone with regard to this application. saves a ton of time and and is a great tool to keep track of expenses including mileage logs...

This article is really great useful and awesome, thank you very much for sharing all the great information within above topic! Thanks so much!!

jmp's picture

this was incredibly helpful! i do have one question though.  can you claim the purchase of equipment as an expense, PLUS claim depriciation?  or only one or the other? thanks in advance!

Lee Whitman's picture

 It's one or the other.  No double-dipping.  That makes the IRS very angry.

This is my first year doing photography - more as a hobby than a side business. I made about $2000, but spent over $2000 + on a computer and equipment to edit my photography, so can I claim that on my tax return? Would that also mean that I wouldn't have to pay any taxes on it? I also did about 5 free photoshoots for family and friends totaling about $600 what I would have been paid. Is there any way to add that as well, or would I only be able to claim that as a gift @ $25 per person?

When you get into specifics like this it's best to contact your CPA, not a group of photographers. Even photographers with tax experience. My standard comment, CPA or IRS, pick one.

That being said the IRS is quite "involved" when folks try to classify their hobby as a business. The first question they ask is, "Does the time and effort put into the activity indicate an intention to make a profit?" Doing free shoots, unless they're donations to a charity, tends to go against your "business" position. I'm not sure you can count your actual business as a gift.

Again, call your CPA.

Guess what I'm doing. Where does photo software/actions fit into deductions? Also adobe monthly membership? There were a few times this year where I used borrowlenses.com specifically for a photography event I was contracted for... Last one: the online stuff: the galleries (like Zenfolio, Pictage); the internet service coming into your home; the webhosting and domain name stuff.... I'm struggling with "what" goes "where" for the most-certainly because-of-the-photo business items. Thanks for any thoughts!