I'm just kind of curious what others write off as travel expenses. I know anything related to the business is deductible, say the miles going to meet a client or do a job. But lets expand on that picture...
Say you go to Vegas, or drive 500 miles to visit family (so both trip examples are personal/pleasure), but while there you snap a couple pictures for use on your website or portfolio, can you now write off that trip to Vegas or that 500 mile drive for 'advertising'?
My first response would be "probably not", but you could argue a business use here in some respect.
It is not an all or nothing type of write-off. You might be able to write off some percentage of the total cost. It is similar to operating a home office. You can't write off your entire home electric bill, but you can (if all conditions are met) write off a percentage of the bill equal to the percentage of the electricity used in the office (usually based on square footage).
True. But wouldn't it get a little shady if every time you drove 500 miles to visit your family, and snapped some shots for your website, and then wrote off a % of your annual trip?
deeno wrote:
True. But wouldn't it get a little shady if every time you drove 500 miles to visit your family, and snapped some shots for your website, and then wrote off a % of your annual trip?
Yup, it might raise red flags, but that does not mean it is not legitimate to do under the right circumstances. The IRS has some pretty clear cut rules on what is a business and what is a hobby. To take any write off at all, photography has to be a business. This does not just mean having a business license. Federal tax law does not accept the fact that you have a business license as proving you have a business.
If photography is a business for you (under the IRS rules) and you conduct business during a non-business trip, you are allowed some write-off. I don't know the rules well enough to tell you how much, or even how to figure it out. A good tax-man can do that.
I travel a lot for my consulting business. I only write off the the trip if the purpose of the trip was business. If I conduct business while on a vacation or other trip I only write off the additional expenses.
I am not an accountant... and I don't work for the IRS. I'm speculating here.
Look at it from the IRS perspective. They get a tax return from you, and in it you list your income and various expenses for the year. Those expenses are broken down into categories (advertising, supplies, travel, etc).
Let's say your income is $1K and your expenses are $5K. Hmm... looks a bit fishy, but let's check to see if this is his first year in business, or a down year in the middle of a string of good years. Pass, he's ok.
Let's say your income is $100K and your expenses are $50K. And that $50K is listed as all travel expenses. Hmmm... looks a bit fishy, in fact I have a hard time believing that a "normal" photo business would operate like that. Let's audit the guy.
Fundamentally, that's the way *I think* of the IRS working, it has boundaries of what's reasonable and what's not, built around it's rules. If you fit within the boundaries, you're probably not up for an audit. But there's certainly a chance that you would extend beyond the boundaries, yet are doing something perfectly legal. That's okay, but you might be going through an audit to prove you were legit.
It is very easy to work the system to gain tax advantages. If the question is "what's the moral thing to do?" I think it's clear that if you legitimately scheduled part of the Vegas trip as a photo opportunity, you should write off a proportion of that trip, say the percentage of time you were actually doing the shoot. But if you just carry a disposable P&S around in your glove box, so that you can say "everywhere I go, I'm a photographer", then in my book that's a tax cheat.
Thanks for the replies everyone. I'm certainly not looking to be "shady" here, just tossing up some what if's.
I do mostly wedding stuff so it's pretty clear to me what is a write off and what's not. But I also branch out to some other "fine art?" or landscape stuff. I was just kinda curious what say, landscape photogs do when they are traveling around taking shots, some that will sell (so they'd be directly related to a business expense) and some that won't or are just taken for website display. It would seem to me that they would have a rather large travel expense write off section, which may or may not, cross the lines of legit.
My tax attorney basically told me the trip has to be primarily related to business, so a few snaps taken while on a pre-planned family vacation does not count. What you could do in such a scenario is to perhaps claim for one day of car rental and associated meal expenses if you went out of your way to take those snaps, but otherwise I'd say it's ethically and possibly legally sketchy.
Ultimately I need to be confident that should the IRS come calling I can give a transparent and clear-cut explanation of what certain write-offs were for. That's my yardstick. If you give the IRS any reason to doubt you, be prepared to get slapped with emergency tax and a detailed audit.
As far as income to expenses ratios, IMO you needn't worry. The whole point of being self-employed is you have the ability to write expenses off against taxes, which means you are going to be able to survive on far less income that your average office worker. Writers and many artists also rely a lot on royalty payments or other forms of compensation that have significant lag times. That might mean your income one year is miserable and write-offs are high because you're working on a project that doesn't pay out until the following year, when income increases and expenses go down. Some years my effective income tax rate is less than 2% because I've deducted a lot and not made stellar earnings. Nothing ususual there.
