[rodgersorgan] Re: Tax Question for Professional Organist
- From: Ed Wilson <actionkbd@xxxxxxxxx>
- To: rodgersorgan@xxxxxxxxxxxxx
- Date: Wed, 10 Jul 2002 12:23:35 -0700 (PDT)
John,
There are probably a few "depends" on doing that, all linked to "how you do
business" (i.e., how your business is "organized" (no pun intended) ... sole
proprietorship, incorporated, etc.).
There are a lot of (tax) advantages to incorporating yourself.
The amount of "write off" is definitely linked to your income from this
enterprise (i.e., professional musician).
First, the IRS says you must make "reasonable income" from your enterprise
within a certain period of time (I believe they give you 3 years to get "in the
black.").
Then next thing is that write offs can not put you "in the red." This likely
means that the instrument would have to be depriciated over time (unless you
make TONS of money like Carlo), which means that certain rules and depreciation
tables apply.
If there is sufficient income, then a "business" can depreciate a large chunk
at one time (in the year of purchase). I don't recall the specific reference,
but this is now about $19,500. This is where a lot of small businesses "write
off" in one shot new computers, printer, fax machines, etc. If you make one
large purchase (say an organ) for $35,000, and have $20,000 in net income, then
(to my understanding) you could take the $19,500 deduction for the organ in
that year, then depreciate the rest over several years. This means that the
organ is "equipment" of the business.
The other sweet thing is that you can claim your space in the home (practice
room/office) as a deduction. But you need to be careful here. The (claimed)
space has to be used for nothing else (unless you want to get into complex
pro-rating formulae) and home office deductions tend to be flags for IRS
audits. But if you have this space cleanly defined, then all expenses can be
prorated to that space based on the square footage of your home (i.e., heat,
electricity, improvements to THAT space). Also, put your coffee maker in there
and you can deduct the cost of the coffee.
There are other more complex methods I have seen, such as "renting" the space
to the "corporation," "leasing" the equipment to the corporation... but all
that stuff gets a bit too complex for me.
Bottom line is, yes you can do it (I did), but seek the advice of a tax
professional (I understand there are a lot of former Arthur Anderson guys out
there looking for work) to get the formula which works best for you.
Regards,
Ed
John Jarvis <jjarvis@xxxxxxxxx> wrote:
A local organ dealer tried to convince me that I could write off the
cost of a new organ on my taxes as a business expense. I have a
question into my accountant but he is gone for several weeks on
vacation.
Do any of you write off your Organ purchase in this way on your taxes?
John
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