The 2019 tax filing season is in full swing and we are here once again to help photographer get their taxes right. This article is aimed at informing photographers living within the US on what they need to know as a tax filer. If you have any further questions after reading though this article, or if you would like us to prepare your 2019 federal tax return, contact us.
Photographer Taxable Income Explained
When approaching your tax return, it is important to first understand what ‘Taxable Income’ is and is not. There is no simple answer to what the IRS see taxable and non-taxable income as. Below I am going to focus on just a few types of taxable and nontaxable incomes that will be relevant to many photographers living in the US. Please note that this list is far from comprehensive and there are many more subsections to income.
Generally speaking income is taxable unless there is a clear law that outlines that it is exempt. Any income that is ‘taxable’ MUST be declared on your federal tax return. You may also have to declare nontaxable income on you federal tax return, however this amount will not be taxed.
Is bartering taxable?
Bartering is classed as the exchange of a product or service for another product or service. Bartering is a common practice in the creative industry. For example, if you offer to photograph a hotels venue in exchange for a free stay at the hotel. The IRS bartering having monetary value, therefore it must be declared on your federal tax return and regarded as taxable income. Not only can bartering be classes under income, but also within Capital Gains and Losses if you are exchanging products or tangible assets.
Photography Royalties and Copyrights
Royalties and Copyrights are a usual factor of many of our clients, who are photographers, federal tax return. Royalties from copyrights on photography your works and similar artistic property can amass quite a substantial potion of income for many photographers. Any royalties you receive must be declared on your federal tax return.
Income from not-for-profit photography
Even if you did not expect to make any income off of your photography, the income must be declared. An example of how not-for-profit income could be made as a photographer could be when you photograph work as a hobby, but then somebody offers to buy the art work. This income is declared differently and claimable expenses are limited to that of the amount the income totals.
Expenses that photographers can claim
Below we have summarised just 2 expenses you may be able to claim on your federal tax return as a photographer. There are, however, limitations to these expenses and so we have also included some red-flags that could trigger a HMRC investigation.
The nature of being a photographer means travel, whether that is on foot, by bike, by car, by train or by plane. Expenses incurred by travelling due to photography work are claimable on your tax return- to an extent. You cannot claim any lavish or extravagant costs (i.e. staying in a very expensive hotel).
The IRS can often be flagged by very high travel costs. It is important to justify and record all of your travel expenses. For instance, with car mileage expenses, record start and stop pedometer reading (take a picture), keep a travel diary that justifies when, why and where you went.
Home as an Office Expenses
The majority of photographers do their admin and editing work at home and therefore this can affect home expenses. You can claim this increase amount on your tax return. Please not the portion of this that you can claim can only be for the percentage of your home that is used SOLEY for photography work.
Claiming too high a portion of your home as an office can be a big red-flag to the IRS. It is a good idea to keep a floor plan of your home to access exactly what portion of your home is being used solely for the purpose of work. The IRS have been known to request photos of your office and even do home visits to check that your expense claim is accurate.
To end this article, we must make clear, there are many other considerations that you must make and include when it comes to filing your federal tax return as a photographer. For example, answering and acting upon questions such as Should you be paying and charging sales tax? Feel free to contact us for help with your federal tax return.