Coming up with THE NUMBER

[Texas Proud]

In 23 years, this system has worked really well. $200 isn't much if you need to buy tech stuff though. If we want to buy something like a $3K camera, iPhone, iPad, etc., I purchase it from the business account, we make sure to use it in our work and then write it off. Anything we buy for the business is 43% - 47% discounted, due to self-employment, Federal and State taxes. Sometimes a big purchase at the end of the year will drop us from 28% to 25% tax bracket, or keep us inside the Roth limits, so I run those numbers carefully

Chill. Our business is tech consulting, web design, book authoring and ebooks, plus we make money from writing for a professional video and a photography website. The IRS would have a really hard time denying that camera equipment and iPads were not a business expense. Not to mention that our business expenses are still very low in relation to the amount of income we have.

Your first post seems to indicate that you wanted the camera for personal use, but would buy it and make sure you use it in your business to write it off.... but the main purpose for the purchase was.... you wanted a camera for personal use... (that is how I read your post)...

The rules are pretty simple, if you use something for both business and personal use, you only deduct the percent that is business, not 100%. Just because you can get away with it does not mean it is legal.... I am not making a moral judgement here, just pointing out that what you seem to say is not legal....

 

[2B]

The question was "Is this legal?" Your answer was "Absolutely".... I do not see how you can not say that you did not say it was absolutely legal....

My use of the word "Absolutely" was in response to Rustward's comment of "did people do this." I see looking back that his first question was "Is this legal" even though several other questions followed. Well, it is "absolutely legal" to the extent that the expense is used for bonafide business purposes. The IRS does not do witch hunts, to my knowledge, of small business owners except in the most egregious of situations. (Then it wouldn't be a witch hunt.)

This is just like people issued a company cell phone are not prorated on the cost based on their use for a personal call. What about laptops or computers on our desks? Realistically, it is the same issue it is just that a business owner has a greater degree of control of what expenses are "required" in their business. There is not a minimum ROI that must be documented.

If PaddyMac has the occasional business use of a $3,000 camera, he can certainly buy it and use it as needed for business purposes. If he happens to take it on his month long trip to France, PM is still ok. I would suggest that one of the first things PM should do when the camera arrives it to put it to some business purpose.

The biggest stretch I am personally aware of is someone buying a hunting rifle/scope and routinely writing off the cost of the "business deer lease." The logic was that they routinely take clients deer hunting. He had several pictures of him/clients standing over dead deer with the rifle clearly in some of the picture. He was certainly up there without clients a significant number of times during the year. I am not aware of the IRS ever questioning this.

 

[Sirka]

Live off one income only

I enable the behavior by not calling him on it every time I see a purchase hit the home account.

If we could get this one small area fixed, life would be just about perfect

Maybe he should open his own Amazon account and pay for it from his checking. I would hate to police small spending amounts, but it would show up when I do month end.
DW insists on tracking cash spending. It has been tough over the years, but we found a way to balance the cash each month with "Fudge Spending" item. It usually means dining out and paying cash.
We aimed to live off one income only, before retiring and putting the other income into savings, that way we could transition to 'no paychecks' without a great shock. Never the less it's tough when decumulating starts.

 

[PaddyMac]

Your first post seems to indicate that you wanted the camera for personal use, but would buy it and make sure you use it in your business to write it off.... but the main purpose for the purchase was.... you wanted a camera for personal use... (that is how I read your post)...

Perhaps you don't understand that when you are self-employed and make your living from your creativity, there is no such thing as "personal" use. We don't have "hobbies". (Hobbies are for people who need to relax because they hate their jobs, imo!) If we spend money on anything that is not a "need", it has to be able to generate income in some way. It's a mindset that perhaps 9-5ers don't have.

For example, we went on a boat trip on Lake Powell last year and took hundreds of pictures of the canyon walls. This year we used them to create mixed media art (they are now hanging in a gallery for sale). This year we took another trip to Lake Powell to take thousands more pictures. We could argue that the boat trips were business - we didn't, but we could have if we really wanted to push it. But if one of these paintings sell and the gallery owner wants more, you can bet that I'll be digging up that boat trip receipt...

Or, if we buy a musical instrument, we use it to write music that accompanies a video tutorial. The only personal stuff we do now is gardening, but even that we managed to turn into a business a few years ago by selling plants to botanic gardens. When it proved to be not as lucrative as the tech stuff, we gave it up.

 

[Texas Proud]

Perhaps you don't understand that when you are self-employed and make your living from your creativity, there is no such thing as "personal" use. We don't have "hobbies". (Hobbies are for people who need to relax because they hate their jobs, imo!) If we spend money on anything that is not a "need", it has to be able to generate income in some way. It's a mindset that perhaps 9-5ers don't have.

For example, we went on a boat trip on Lake Powell last year and took hundreds of pictures of the canyon walls. This year we used them to create mixed media art (they are now hanging in a gallery for sale). This year we took another trip to Lake Powell to take thousands more pictures. We could argue that the boat trips were business - we didn't, but we could have if we really wanted to push it. But if one of these paintings sell and the gallery owner wants more, you can bet that I'll be digging up that boat trip receipt...

Or, if we buy a musical instrument, we use it to write music that accompanies a video tutorial. The only personal stuff we do now is gardening, but even that we managed to turn into a business a few years ago by selling plants to botanic gardens. When it proved to be not as lucrative as the tech stuff, we gave it up.

An interesting answer.... but don't think that someone who disagrees is someone who has not owned their own business... or has not dealt with people who have the same thinking as you...

WAY back when.... I was a tax accountant... there was this multi-millionaire doctor who wrote books, owned a lot of property etc. etc.... he made money on a lot of different items... One of the things that was very interesting about him was he did not stay at hotels... if he went someplace he actually bought a place and would rent it out after he left... he owned RE all over the world... he told the tax partner who handled his account... "everything I do is for business", kind of like your statement... he wanted to deduct the salary of his maid, all his other household staff, his jet, cars etc. etc... you get my drift... the partner said "not with us doing your return"...

Another wanted to deduct the $2 million he spent on his daughter's wedding.... saying that he had so many business people there that it really was a business meeting... again, a no from the partner...

I get what your are saying.... just because you say it does not make it correct... I also know that there are a lot of very weak connections between what is for business and what is not... and I also know that a lot of businesses do things that the CEO likes so there is a business connection..

OH, almost forgot the one that was audited... there was this rich guy who bred dogs... he spent about $1.5 million a year on them... but had income of about $500K... year after year... when the IRS did their audit, they said it was a hobby as there was no profit motive involved... he got a big tax bill (also had many deduction they said were not valid)...

Again, not saying what you do is or is not what many people do... and even if audited you might not have to prove much... I am just stating what the rules say...