Tax Write Offs

narticus

Just wondering what kinds of things you US citizens write off on your taxes. I am currently working in architecture visualization (full-time and freelance on the side), and studying game art. I am definitely writing off any computer related expenses, such as my new laptop and my internet/electric bill.

But I'm wondering if more things apply since I am studying game art and planning to make a go of it in the future. Like, could I write off a purchase of an HDTV and PS4? What about speakers for my home theater? Maybe even furniture, like a credenza, to put the tv and ps4 on?

I know I should probably ask a tax professional, but would like some feedback from people in the industry first.

Thanks

Mark Dygert

You have to be really careful when trying to write off mixed expenses as business expenses. When I was looking into it about 2 years ago, you needed to separate living and personal expenses from business expenses as much as possible. The IRS is pretty tough and kick out any write off if its mixed with anything personal.

With internet, unless you have a separate dedicated line for your business they are probably going to toss out that write off. Same goes for Electric, they normally want a separate meter that is operating on a dedicated space. When they can't strain out personal use from business use they normally toss it out and tell you to pay up.

With equipment, you pretty much need dedicated equipment that is used only for that purpose, for it to qualify. If its also your personal laptop/computer then they normally don't allow it.

As for fuzzy expenses like your home theater speakers, you're pretty much screwed. Unless it falls within a dedicated space for your business they won't allow it.

About 10 years ago the IRS became ubber strict on things like this. People would remodel their whole home and write it off. Or they would remodel one room claim it was their home office but then next year claim another room was their home office and remodel that room. They cracked down hardcore on that kind of stuff and new laws where written.

But the laws change constantly from year to year, so you should talk to a tax pro, but chances are, things have only gotten more strict... Unless you have someone in your back pocket writing tax laws specifically in your favor, the tax laws aren't going to work you.

narticus

Hmm, I would think they are less strict now with the struggling economy. Wouldn't that help out small businesses?

I plan on seeing a professional about it for sure, either way.

Mark Dygert

The economy is struggling sure, but the government is struggling to bring in revenue so they aren't going to be lax on people who owe them money. When times are good they and money is flowing freely, they tend to not enforce quite as much.

It's the same on the local level too. Cops might pull you over for speeding and during the good years let you go with a warning. On the bad years they get force fed safety initiatives "Click it or ticket" and pass out tickets like they where candy on Halloween. warnings dry up in tough times because paid tickets bring in more revenue than free warnings.

Pretty much anyone running their own business gets the rubber glove treatment at least once or twice a decade. They try to leave you with the impression that they will crush you if you don't pay what you owe. You can't fight the IRS you can only hope to minimize the damage they can do to your personal finances.

The more you interweave your personal and professional finances, the higher the chance is that they will destroy both instead of just one.

They really don't mind hacking your ship into itty bitty pieces if they price of the scrap will cover what you owe. They really don't want to hear anything about future revenue that you might bring in if left operable, they only care about what you owe and what you have that they can take, and they will take it one way or another, its a fight you can't win, so CYA as much as possible and assume they won't go along with your tax schemes...

Autocon

There are a lot of factors in determining what you can and cant write off.

To be able to write something off you need to prove (when and if they audit you) that the item in question is essential for your A. Job, B. Keeping your skills up to current level for your given profession or C. Increasing your skills to help you get a better job that you are actively apply for. (this last one is important because if you cant show that you are applying for positions and making strides to get a new job and the item you purchased is helping due so then they will nail you when they audit you). Getting a PS4 and saying you need it too get a job in the games industry but your just a student studying and not actively applying places they wont let you write that off.

You also cant fully write off an item unless you are using it solely for the purpose of your job. If it bleeds over into personal use you have to state what percentage is personal and professional use. And then you only write off that percentage. They make it super easy to do this in Turbo Tax if you use that.

An example would be your computer, you absolutely are not using your computer solely for professional work. You are using it for a multitude of other activities such as Games, Movies, Surfing the internet, Chatting with people and a ton of other "personal" non essentail work related things. These are all personal reasons to have a computer and cut into the percentage of how much your computer is actually for your professional need.

Your electricity is an essential item of just living, zero chance you can write that off. Same with the internet, that will never let that slide. You cant write off your car as a required expense even if you need your car to get to work.

Look at it this way. If the item you purchased is not actively helping you increase your salary or helping you improve your skills for jobs you are actively trying to get you should assume you cant write it off.