Pro photography is an exciting career choice that also comes with a major headache: figuring out taxes. Filing taxes is already a convoluted and confusing process, and doing so while self-employed or running a small business becomes even more frustrating. Luckily, information is abundant out there available to help file taxes correctly, avoid fees, and reduce stress.
Filing taxes as a self-employed photographer should be done through a 1040 form. Other forms help with declaring deductibles, calculating specific taxes, and finding other expenses. Self-employed people must pay quarterly taxes to the IRS and will pay more than when hired by a company. Set aside roughly 30% of income to pay taxes quarterly. Many parts of the photography business are deductible, so take the time to keep receipts and invoices.
Despite how many details there are to remember about filing taxes, there are basics that are not complicated. Read on for a total guide on deductibles, expenses, tax filing, and tips to make doing taxes as stress-free as possible.
How to File Taxes as a Photographer
Filing taxes as a self-employed photographer can be stressful. While avoiding any slip-ups and trying to ensure that everything is correct, it is important to expense as much as possible to properly track your business income.
There are a number of different forms available for filing that can get confusing, but each is intended to separate different necessities and common issues with filing as a self-employed individual. It is important to get a basic understanding of each of these forms before filing your taxes.
These important forms are:
The 1040 form covers all of the basics and includes information like income and expenses as total. It is the most important form, but others contain vital information like expenses, medicare, workspace deductions, etc. Each one and more may be important for your specific business.
While many of the forms are self-explanatory, some may be confusing and cause wonder about if you need to file them or not. If you are unsure at any point, it is best to contact an attorney before filing, as you are likely to pay significantly more if you incur any additional fees from the IRS.
The 1040 Form Covers Most Tax Purposes for a Photographer
The 1040 form is the single most important form to file when doing your taxes as a self-employed photographer. This form includes your gross income, deductions, basic tax credits, and other essential information.
This lists everything out from a birds-eye view, while the other forms below go into necessary specifics. Consider this a table of contents or cover sheet for your tax return.
Unlike some other forms on this list, anyone filing taxes as a self-employed photographer must include this form.
Schedule C Is Where Deductibles Are Listed
The schedule C form is the basic form that covers most information for self-employment. This covers income specifically from photography in addition to any and all expenses.
Deductions listed on this form are itemized, meaning each one is listed out with name, amount, and date. This is important for any photographers declaring expenses, which anyone in business should be doing.
Also included in this form is information about vehicles used for mileage expenses, cost of goods sold, and other useful notes about how to properly expense things.
This form is necessary for filing taxes when self-employed and will include a significant amount of important info.
Schedule SE Calculates Medicare and Social Security
The Schedule SE form is used to calculate how much is owed to medicare and social security for the year. This form has nothing special on it besides that basic information, but it is still essential when filing with a Schedule C.
Due to the confusing nature of most tax forms, this one comes with a handy flow chart to determine how much you should be paying toward these two outlets.
Form 2106 Is for Business Expenses Like Travel
Form 2106 also covers business expenses, although this one focuses on travel and mileage. Form 2106 will generally be included in either Schedule C if you are fully self-employed, or on a W2 if you are contracted out to a company or other photographer.
This form specifically handles mileage for travel and does so in one of two ways. The options are either standard mileage or actual expenses. The deduction and calculation method for the two ways changes often, and it is worth calculating out both. You can choose whichever method yields the highest deduction.
This form is likely optional for those filing a Schedule C, but do your own research into how your business is being run before deciding.
Form 8829 Allows You to Deduct Your Workspace
Form 8829 is essential for anyone working from home, as it allows a certain percentage of your home to be deducted. The portion of your rent or mortgage that is deducted is based on the size of your home office, and the size of the home or apartment.
To calculate this, you simply need to know the total square feet of the home and the total square feet of the section used for your home office. Divide the office square feet by the home’s total square feet to get your percentage.
This is only applicable to those with a home office. If you have a home office and also have an official office or studio, you likely cannot expense both. Additionally, the space being declared for the home office needs to be reasonable and actually used for this purpose. It will likely be a room or small area of a living room that is declared.
Form 4562 Is Used for Calculating Depreciation of Equipment
Form 4562 is used for declaring depreciation and amortization. Any large expenses you plan on depreciating, such as computers, lenses, camera bodies, etc. will be listed here.
It is important to check what the equipment is depreciated at and for how many years, as this can change from category to category. Most photography purchases will be depreciated for five years, but this could change.
Everything on this form should be things you are planning to use for more than one year. These are capital expenses that are then split over multiple years of filing taxes.
Are Photography Props Tax Deductible?
Declaring tax-deductible items is one of the most important things to do while self-employed. This allows you to separate business and personal purchases, pay less on taxes, and invest more in your business.
Photography props are tax-deductible, although the deduction changes depending on how the item was used. Following similar rules to all deductibles, the length of time the item was used for business purposes determines how much is deductible.
To deduct a photography prop, keep the receipt or invoice and mark down the purchase date, price, and location of purchase. This should be done in a professional and easy to access manner, like a book or digital spreadsheet.
When filing taxes, the photography prop will be added to Section C, a form of itemized tax deductions. If the item was used for business purposes and later repurposed, only a percentage of the item can be deducted from taxes.
The percentage of what can be deducted is directly related to how much time the item spent on business vs. other use. For example, if a rug was used for photoshoots for half a year, and then placed in your home the other half, 50% of the purchase is tax-deductible.
If the prop has significant value and is to be used over multiple years, you can instead declare it using a depreciation plan. A depreciation plan accounts for how long the item is expected to be used, dividing the cost of the item by the years. Then a plan is set up for how much money is deducted using this information.
Much of this information about photography props and deductibles apply to other parts of the photography business, too, so it is important to track all purchases used for the job.
What Parts of Photography Are Tax Deductible?
In short, any item or purchase done to further, help, or invest in your photography business is tax-deductible. It is important to be vigilant and honest with tax deductions, as the IRS may audit you if anything seems off. Additionally, there are specific rules for some purchases, so be sure to do final research before deducting anything.
With that said, there are a few common items that are tax-deductible. These are worth your time to deduct from your taxes to save on taxable income and properly declare your business. Some of these common tax-deductibles are:
- Travel expenses
- Mileage expenses
- Business advertising
- Equipment repairs
- Equipment purchases
- Ordinary and necessary meal expenses related to the business
- Gift expenses up to $25 per client
It is important to be specific and keep receipts for any expenses or deductibles you may declare. Especially if you have a significant amount of deductibles, the IRS may audit you, so it is important to keep evidence and have reasons for each deductible.
Mileage and travel expenses may come up often for photographers, as they often travel to different photoshoots and locations. General travel expenses, hotels, flights, rental cars, and public transportation services are all deductible if you are traveling for a client meeting or a business conference.
It is common to drive to photoshoots for many photographers. The miles put on your personal vehicle and deductible as well. Be sure to track the miles driven for each photography shoot. The federal rate and your state’s rate per mile may differ, so be sure to look into each, but it is roughly 50 cents per mile.
Business advertising includes things such as website costs, ad time, billboards, business cards, or anything else that gets your name out there to more clients.
Gift expenses are specifically for sending out gifts, cards, or other special items to clients. This is most often done in the form of “thank you” cards, but any gift is applicable. However much money is spent on the gift, there is a hard limit of $25 per client per year.
Of these common items, the most scrutinized tends to be meal expenses. Due to the varying nature of meal prices, it is important to follow the “ordinary and necessary” aspect of meal expenses. This is applicable when you are meeting a potential client at a coffee shop, having a working dinner with fellow photographers, or other events like this. It could be helpful to mark down which client or reason you had for each meal expense for your personal records.
How Do Deductibles Work?
Deductibles are often confusing for self-employed people, especially those new to it. Deductibles, or expenses, are costs that accrue for running your business. When these expenses are declared while filing taxes, the money spent on expenses is deducted from your taxable income.
As an example, if you earned $60,000 from photography and spent $10,000 on expenses, you would only be taxed on $50,000. You do not get the money from expenses back or any additional compensation, but fewer taxes are taken from you.
Small purchases are generally expensed immediately, meaning the money spent is directly taken out of taxable income that year. The other option for large purchases is declaring the item as a depreciation.
Depreciation is when a portion of an expense is deducting each year the equipment is used, rather than all at once. As an example, a $3000 computer may be depreciated to lessen the tax break for the first year, but guarantee that amount for future use. This is helpful for averaging out expenses and estimating taxable income.
There are three different methods of depreciation. These are:
- Straight-Line Depreciation
- Double-Declining Balance
- Sum-Of-The-Years’ Digital Depreciation
All of these adjust the time and amount expensed each year, and do not adjust the value being expensed. Regardless of which method you choose, a $3000 computer purchase will still only be expensed for $3000.
The most common method and the easiest is straight-line depreciation. To do this, you estimate how long the equipment will be used for, and the “salvage value”, or what it will be worth at the end of use. For the computer example, let’s say the computer will be used for 5 years and be sold for $1000 at the end of its life.
Once these numbers are known, simply subtract the salvage value from the amount spent. In this case, that means $3000 minus $1000. The number this gives you is then divided by the number of years you estimate the equipment will be used for. That number is what is deducted every year. So, the $2000 over five years will deduct $400 per year.
Double-declining balance is another method of calculating depreciation that assumes the item purchased wears out quicker at the beginning of its lifetime. Equipment such as camera bags, tripods, etc. falls into this category.
Double-declining balance frontends the expenses, meaning that you deduct a larger amount in the earlier years of the equipment. The total expensed will still stay the same.
Sum of the year’s digital depreciation is the most complicated way of finding depreciation, but it is helpful for getting more control over your taxes. This method involves creating fractions based on the life expectancy of the item, then multiplying the value by these fractions to determine how much is expensed each year. Once again, the total expensed will not change.
To do this, add together the different years of life expectancy from the item. For a five year item, this means 1+2+3+4+5 to get 15. Then, create fractions using the original digits over the total sum, starting from the top. So, year one would be 5/15, year two would be 4/15, and so on until all digits are used. These fractions are multiplied by the total value being expensed every year.
This results in an easy curve for the whole life cycle of the product, front-loading the expenses. Once again, the total value being expensed for each method does not change.
Whichever model of depreciation you decide to use, be sure that it works best for your business. It is always an option to simply declare the item all at once and receive a particularly large exemption one year with no additional coverage the following.
Useful Tips for Managing Taxes as a Photographer
Although knowing which forms you need and how deductibles work are essential skills for filing your taxes as a photographer, it is just as important to establish good habits early on. Taking an extra few minutes every week or month to bookkeep and pay quarterly taxes will make doing taxes much easier in the long run.
Keeping an easy to access book of all invoices, spending, and estimated taxes will make your life much easier around tax time. Most often, this is called bookkeeping and covers the gritty, boring details of running a business.
Especially when paying your taxes with no employer to cover any percentage of fees, it is important to set aside income for taxes and properly manage your finances.
Bookkeep Consistently to Make Tax Time Easier
Bookkeeping is one of the most important skills to garner while running a photography business. This involves keeping track of expenses, fees, income, profit, and all other types of information important to a business’s financials.
There are many programs available that make this a breeze, where you can simply upload screenshots of invoices or receipts and enter the amount spent or earned. These are great for busy people or photographers who do not want to bother with this sort of work too much.
However, it is also possible to do the bookkeeping yourself with just a bit more extra time and some spreadsheets. This can be useful as you know the data is secure, it does not incur a fee, and the information is accessible whenever you need it.
Whichever option you choose, it is important to track income and expenses as they pop up. Make this easier on yourself by maintain separate bank accounts for your personal and business activity. Setting up a schedule of inputting information every week is a fantastic choice, as it will not take long and you will have constantly up to date information about how your business is being run.
The larger your photography business grows, the more proper bookkeeping is necessary. It is best to build a habit while small and grow in scale easily. If you higher on employees, it will be essential to include their fees and taxes in recordkeeping as well.
Pay Quarterly Taxes on Time to Avoid Fees
Paying quarterly taxes is essential for running your own business. Because you are not getting paid through a company that automatically takes out taxes from your paycheck, the IRS requires you to instead send in tax money every quarter instead of every year. Matching their schedule will stop you from incurring any unnecessary fees, keep your finances up to date, and help with expense reports.
Quarterly taxes can be paid for in a variety of ways, similarly to the yearly taxes you are likely used to paying. Quarterly taxes will be based on your 1040-ES form and include a report on expenses to lighten how much you owe in taxes.
Quarterly taxes are comprised of social security tax, medicare tax, and income tax. The income tax is going to be higher than what you are used to paying, as you no longer have an employer covering half of the taxes. The full percentage of self-employed tax is 15.3%.
The deadlines for quarterly taxes may change from year to year, so it is best to check the IRS directly for when these are due. This information can be found here, on the IRS website.
Set Aside Estimated Taxable Income
To pay for quarterly taxes as well as all taxes in general, it is best to set aside 30 percent of your income explicitly for tax purposes. This will cover the state, federal, and self-employment taxes.
You should set aside 30 percent of your taxable income, not total income. Be sure to account for any expenses before calculating what to leave for taxes, as that may change things dramatically.
You can calculate the thirty percent per quarter, per year, or even per transaction. Be consistent and have a plan to account for the 30 percent, as it is a sizeable amount.
Regardless of how often you are calculating out the 30 percent to put aside, it is important to pay your quarterly tax rate on time. Depending on how much you are earning, the total earned could be less or more.
30 percent is quite high, so this number may come as a shock to many newly self-employed photographers. A large chunk of that is due to the self-employed tax, which is normally covered by employers. As you are now self-employed, this rate falls on you directly.
Setting aside taxable income is one of the most important steps to take when starting out as self-employed, as otherwise, you could end up with too little money to pay your taxes. This will inevitably incur fees and could possibly ruin the business. To avoid this, it is best to set aside the full thirty percent and be ready to pay every quarter.
Consider Setting Up an LLC
An LLC is a small business license that will separate your business’s financials from your personal one. This is beneficial for a number of reasons and ultimately is worth doing for almost any professional photographer.
One of the largest benefits of setting up an LLC is for legal protection. If someone sues you for anything business-related, an LLC ensures that only the business assets are accountable. This way, your personal bank account, mortgage, or anything else not in the business name will be left alone. Without an LLC, someone suing you has access to all of your assets.
An LLC establishes your photography freelancing as a business, so liability falls directly on it. In this case, you would pay yourself a salary from the business’s earnings.
For tax purposes, LLCs will cause very little difference until high levels of income. You will be taxed on your personal taxes as normal, except only on what you take out of the business account. If you do this, be sure to pay yourself a reasonable salary, as otherwise, it is a red flag to the IRS.
When setting up an LLC, it is important to set up a specific bank account for the business. Clients can pay directly to the bank account, and you can even establish a separate account for holding tax money.
Additionally, setting up an LLC can lend some credibility and professionalism to your business. Clients may be willing to pay higher rates and respect you more as a legitimate business if you are registered and accountable.
Ultimately, an LLC creates an often-needed separation between business and personal finances that comes with a host of benefits. As your business grows in size, money left in the LLC accounts can be shielded from some taxes and ultimately increase your total takehome amount.
Another thing you should consider besides your prices, is whether or not you should charge separate sales tax. But that’s not all.
This 3500+ word article is just the beginning. Your situation may be unique and require additional professional help. Either way, I highly recommend you speak to a tax professional before finalizing tax plans.
Eventually you’ll get the hang of it and find fun ways to reduce your tax burden while increasing the capacity of your photography business. Fun stuff!
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Roy is the leading content creator here at Your Photo Advisor. He is a hobbyist photographer that loves the business side of things. He blogs about IT, cybersecurity, business, and more at Davis Tech Media.