Taxes and expenses for freelance photographers

Running a photography business means you have to deal with taxes and expenses. Managing your tax obligations isn’t the favorite part of being a business owner, but paying attention to this critical aspect is a must in order to protect your photography business.Managing expenses can likewise be tedious, but doing so effectively and efficiently ensures you have an accurate record of cash out--and what’s reimbursable to you through your fees.

Your responsibility for taxes

As an owner of a photography business it is your responsibility to collect tax from the consumer. When you sell products or services that are in and of themselves taxable or are a part of a taxable product you need to collect sales tax.

The one common theme is that every state has different tax law and regulations so be sure to be informed up-to-the-minute. It’s your business at risk, after all.

Below are some tips you should know when approaching taxes in your photography business:

  • State sales taxes vary from state to state, so make sure you are current with your state’s sales tax requirements. If you do business in multiple states, you will most likely have to file sales taxes in each state, adhering to their requirements.

  • Are tangible items, such as gallery wrap, taxable or are the services, such as the sitting fees, taxable as well? What about digital images? Again, laws change state to state so make sure you have access to the latest regulations.

  • Sales tax on digital images is an emerging issue and not all states have laws regarding them, but laws are changing all the time. Be informed.  

  • In some states, use taxes can be collected on out-of-state purchase, such as cameras and accessories purchased over the Internet from a state that has no sales tax. It is the photographer’s responsibility to understand use tax law in the state in which they operate and file appropriately.

  • Be aware of sales tax exemptions for non-profits, as they are not generally required to pay sales tax. Make sure you talk to your non-profit client to understand if they are exempt before billing for any taxable photographic products or services.

Keep track of your expenses

Like most photographers, you love being in business for yourself. But sometimes paperwork gets in the way of your passion. But effectively managing your expenses is a key part of ensuring the health of your business.

Here are a few tips on how to manage your expenses:

  • When you purchase products, like a new camera, lens, or piece of software, you’re incurring an expense. A good way to ensure your business is running smoothly is to pay off your expenses as you go and keep them to a minimum so they don’t become liabilities.

  • Equipment purchases are considered fixed assets, and they depreciate over time, about twenty percent per year. It’s a good idea to make sure large purchases -- cameras, lighting, etc. -- are made in the same tax year to maximize full-year deductions. Additionally, the IRS lets small businesses depreciate the entire amount of fixed asset depreciation in the tax year it was purchased. If you take advantage of this, it’s a good idea to lump major purchases in one year to maximize your deductions.    

  • Keep track of your travel! The IRS allows mileage deductions for driving to and from clients or locations, and you’ll want to keep all related receipts including, insurance, fuel, and repairs. Keep a running log of your mileage so if anyone asks, you can show them where you’ve been.

  • You can deduct a portion of your home if you use it for part-time or full-time business purposes such as image manipulation, photo printing, and album building. If you have a home studio, you will definitely want to take advantage of the deduction for rent expense.

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