Tax Deduction

[Martin Boekers]

Moderators, please move this if more appropriate in another area.

I just received an email from Trotec, that for the year 2014 you can get a tax deduction for a total
cost of lasers new or used as opposed to depreciating them over time. This may be of interest to some
of you. This includes software... It's called Section 179 Tax Deduction.

You may want to check with your accountant.....

[Bruce Hoffman]

Sec 179 is a very useful tool especially for small businesses.

The current cap is $25,000, which means you can deduct up to $25K of capital purchases from your income which could be up to $8,750 tax savings [at max 35% rate!!!].

Other provisions in the tax code also apply, so use the calculator below to see what it will do for you.

Then consult your tax accountant. Do nothing without consulting a responsible tax adviser, unless you're fluent in IRS code.


http://www.section179.org/section_179_calculator.html

The bad news:

Unfortunately the do-nothing congress has put off renewing sec 179.
It is set to expire at the end of the year, which means you can use it for any purchases for year ending 12/31/2014, BUT unless they put it in a clean bill it may go the way of the dodo.

Contact your congressmen and advise them that you won't be able to afford to vote for them the next time they're up for re-election

[Jay Selway]

Moderators, please move this if more appropriate in another area.

I just received an email from Trotec, that for the year 2014 you can get a tax deduction for a total
cost of lasers new or used as opposed to depreciating them over time. This may be of interest to some
of you. This includes software... It's called Section 179 Tax Deduction.

You may want to check with your accountant.....

Yeah I saw that as well. I'm going to find out if my Epilog applies. I think it's for any equipment.

[Dan Hintz]

Yeah I saw that as well. I'm going to find out if my Epilog applies. I think it's for any equipment.

It's all equipment, so an Epilog surely fits the bill.... Section 179 has been around a while now. Every year the laser companies send out those notices.

[Keith Outten]

It works for company cars, vans, trucks and tractors as well :)

[Bert Kemp]

How would that work for a guy like me:confused: I'm not sure what my status is as a business. Since I give most of my stuff away. I do have some things in a consignment store to try to help cover some of my materials and sometimes I sit down town and sell some stuff at the weekend crafts show, but that doesn't even come close to covering what I spend and I just took out the money from my IRA to buy this new Rabbit and I know I'm over my withdrawal limit for the year and will have to pay taxes on that money. I do have an Arizona Transaction Privilege Tax License which allows me to sell retail and I do pay taxes monthly on what ever I do sell. So maybe, I'm hoping this law might help me and I can use it to lower what taxes I'm going to have to pay this year.

[Bert Kemp]

How would that work for a guy like me:confused: I'm not sure what my status is as a business. Since I give most of my stuff away. I do have some things in a consignment store to try to help cover some of my materials and sometimes I sit down town and sell some stuff at the weekend crafts show, but that doesn't even come close to covering what I spend and I just took out the money from my IRA to buy this new Rabbit and I know I'm over my withdrawal limit for the year and will have to pay taxes on that money. I do have an Arizona Transaction Privilege Tax License which allows me to sell retail and I do pay taxes monthly on what ever I do sell. So maybe, I'm hoping this law might help me and I can use it to lower what taxes I'm going to have to pay this year.





Moderators, please move this if more appropriate in another area.

I just received an email from Trotec, that for the year 2014 you can get a tax deduction for a total
cost of lasers new or used as opposed to depreciating them over time. This may be of interest to some
of you. This includes software... It's called Section 179 Tax Deduction.

You may want to check with your accountant.....

[Howard Garner]

How would that work for a guy like me:confused: I'm not sure what my status is as a business. Since I give most of my stuff away. I do have some things in a consignment store to try to help cover some of my materials and sometimes I sit down town and sell some stuff at the weekend crafts show, but that doesn't even come close to covering what I spend and I just took out the money from my IRA to buy this new Rabbit and I know I'm over my withdrawal limit for the year and will have to pay taxes on that money. I do have an Arizona Transaction Privilege Tax License which allows me to sell retail and I do pay taxes monthly on what ever I do sell. So maybe, I'm hoping this law might help me and I can use it to lower what taxes I'm going to have to pay this year.

Since you do have a resale tax license, I believe you should be looking a filing Schedule C this year.
That way you can deduct many of your expenses against income. Start gathering data now if you have not been doing it on a consistant basis.

Howard Garner

[Bert Kemp]

Well Ya know I really never gave it much thought thru out this year, like I said I don't sell much and I pay taxes on what I do sell monthly, and I haven't had to pay income tax since I retired, so my record keeping of what I bought was pretty much irrelevant.But I took the money for the new laser from my IRA and that put my income for this year to the point I'll have to pay income tax. Then I see this tax deduction thread and I'm thinking if I can deduct the cost of the machine from income then I'll probably drop back into the safe zone. So I'm hoping.:)


Since you do have a resale tax license, I believe you should be looking a filing Schedule C this year.
That way you can deduct many of your expenses against income. Start gathering data now if you have not been doing it on a consistant basis.

Howard Garner

[Mike Troncalli]

Found this on the IRS website.


Millions of people enjoy having hobbies — whether it’s photography, antiquing, craft making, collecting coins, or breeding horses. It usually costs money to support a hobby, but in some cases, your hobby can also make you money.

If you have a hobby that is also a source of income, you’re required to report the income on your Federal tax return (http://www.irs.com/articles/individual-income-tax-return). In order to properly report your income and expenses to the IRS, you must ascertain whether the activity is classified as a hobby or a business.
This article explains the IRS rules for determining if an activity qualifies as a business, and what restrictions apply if the activity is not a business.
Hobby vs. Business
For tax purposes, a hobby is defined as an activity that you engage in “for sport or recreation, not to make a profit.” Even if you earn occasional income from doing such an activity, the primary purpose must be something other than making a profit.
To distinguish between a hobby and a business, you must take into account all the facts and circumstances of your situation. The IRS lays out the following 9 factors that should be considered when establishing if an activity is a business engaged in making a profit:


Whether you carry on the activity in a businesslike manner
Whether the time and effort you put into the activity indicate that you intend to make it profitable
Whether you depend on income from the activity for your livelihood
Whether your losses are due to circumstances beyond your control, or are normal in the startup phase of your type of business
Whether you adjust your methods of operation in an attempt to improve profitability
Whether you (or your advisors) have the knowledge needed to carry on the activity as a successful business
Whether you were successful in making a profit in similar activities in the past
Whether the activity makes a profit in some years, and how much profit it makes
Whether you can expect to make a future profit from the appreciation of the assets used in the activity

According to the IRS, an activity is deemed as a business if it makes a profit during at least 3 of the last 5 tax years, including the current year — or at least 2 of the last 7 years if the activities mainly consist of breeding, showing, training, or racing horses.
Tax Deductions for Hobby Expenses
In general, you are allowed to deduct ordinary and necessary hobby expenses (with certain limitations). An “ordinary” expense is one that’s considered common and accepted for the activity. A “necessary” expense is one that’s considered helpful and appropriate for the activity.
Since a hobby is not a business, hobbyists are not entitled to the same tax deductions (http://www.irs.com/articles/tax-deductions) that businesspeople can claim. As a hobbyist, you can usually deduct your hobby expenses up to the amount of your hobby income. But any expenses that exceed your hobby income are considered personal losses and are not deductible from your other income.
How to Deduct Hobby Expenses
In order to deduct your hobby expenses, you must itemize deductions (http://www.irs.com/articles/types-of-tax-deductions) on your income tax return. There are 3 categories of deductions that your hobby expenses may fall into, and these deductions must be taken in the following order:


Category 1: Deductions you can take for personal as well as business activities are allowed in full. For individuals, all non-business deductions (such as those for home mortgage interest, taxes, and casualty losses) belong in this category.
Category 2: Deductions that don’t result in an adjustment to the basis of property are allowed next, but only to the extent that your gross income from the activity exceeds your deductions under the first category.
Category 3: Business deductions that decrease the basis of property are allowed last, but only to the extent that your gross income from the activity exceeds your deductions from the first 2 categories.

Use Schedule A (Form 1040) (http://www.irs.gov/uac/Schedule-A-%28Form-1040%29,-Itemized-Deductions) to claim your itemized deductions. Any amounts from categories 2 and 3 are considered miscellaneous deductions and are subject to the 2% AGI (adjusted gross income) limit.
If you haven’t filed your 2013 tax return yet, you can use E-file (http://www.e-file.com/start-filing.php?utm_source=irscom&utm_campaign=all&utm_term=other) to complete your taxes online.
For more information about hobby rules and allowable deductions, please refer to IRS Publication 535 (Business Expenses) (http://www.irs.gov/uac/Publication-535,-Business-Expenses-1).