Tax write offs? Help me out here.

[Motown Marvel]

okay, so im going to buy a new computer. i have a bachelor degree in illustration, which makes me a professional artist. one reason i use a computer is to do art work. which makes it a material for my profession, which in theory means i can write it off on my taxes, right?

so, what criteria do i have to meet to make this a legit write off and how do i go about doing that?

1,2,3, GO!

 

[Majic Walrus]

I'm pretty sure you have to have proof of working in a business. Do you own your own or work for a company that does illustration? If not then it's pretty much personal usage.

 

[terry78]

You can write it off, but it will have to be detailed on the form as to why. If it's part of your work as an illustrator, they really can't debate it since a computer is an essential part. But just be prepared if they decide to actually ask about it.

BusinessWeek says:

Tax Write-Off: Home Office Computer
As our experts pointed out before, it's not a good idea to mix your business world with your personal life. So they recommend never using your home office computer for personal tasks if you can help it.

* Expert Opinion: "If this is the only computer in your house, you'll have to calculate the percentage of total time you use it for business purposes," suggests Ennico.

* How to Do It Right: Ideally, your best option is to purchase a laptop and dedicate it to being your personal computer. This way you can avoid any messy situations come audit time.

 

[Motown Marvel]

thanks. and yeah, it'd be the only computer i use, so....hmmm.

 

[Handsome Rob]

okay, so im going to buy a new computer. i have a bachelor degree in illustration, which makes me a professional artist. one reason i use a computer is to do art work. which makes it a material for my profession, which in theory means i can write it off on my taxes, right?

so, what criteria do i have to meet to make this a legit write off and how do i go about doing that?

1,2,3, GO!

You need to use your computer for business more than 50% of the time in order to expense it. If you do, you can expense it as a Sec. 179 deduction. I'm assuming that you are self-employed (a sole proprietor). Of course, that's a tricky issue that you may have difficulty proving should the IRS decide to audit (and the burden of proof would be on you if you don't do a good job keeping records that can show > 50% business use). For this reason, I agree with Terry--buy a dedicated computer solely for business use. And, if you elect the 179 deduction with a mixed use computer, you can only deduct the percentage used for business (i.e., a 60% business-use computer costing you $1,000 would have $600 eligible to write off).

If this is a new business and you use a calendar year for tax purposes, you might consider waiting until the new year if you can to purchase for two reasons. First, the Sec. 179 deduction is limited to your total taxable income. If you haven't been working long, you may not have enough taxable income to deduct the computer. Second, in theory you will earn more in 2009 than you did in 2008 (I hope!). The expense can offset income which might be taxed at a higher rate should your income push you into a higher bracket than 2008 leaves you.

By the way, you can elect to capitalize and depreciate the computer (which off the top of my head has a 5-year useful life--don't quote me on that, though).

Whatever you decide, good luck . . . and keep detailed records!