# Time to get the Government to pay for your new equipment



## binki (Jul 16, 2006)

For those in the United States now is the time to look at capital expenditures. With Section 179 you can depreciate up to $125,000 in capital purchases. You don't have to even pay for it, just put it into service before January 1st. The best part is whatever your effective tax rate is, the government essentially pays that portion of your purchase. 

An example. You purchase a $20,000 vinyl plotter/cutter and your effective tax rate with Federal, FICA, State income taxes is 40%. The $8000 you will no longer be paying in taxes because you reduce your income by $20K through section 179 with the purchases effectively pays that part of the equipment. Now that is what I call 'Putting my taxes to work!'

Reference: Tax Law Changes for Businesses

Remember to consult a CPA and/or Tax Attorney. Your mileage may vary.


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## T-BOT (Jul 24, 2006)

that's good news.



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## badalou (Mar 19, 2006)

And something I do.. Here are some deductions that I bet a lot of our members don't take.
Your computer.. Even if you bought it years ago you have now placed it in service for your buisness.
Your Printer , same
Ink for the printer
Cost of your website. Your hosting fees.
Your office supplies. Postage.
Your delivery cost on shippment recieved.

Feel free to add on..


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## binki (Jul 16, 2006)

Anything you do for your home office including flooring, painting, roof, etc. 
Your car if you use it more than 50% for the business


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## T-BOT (Jul 24, 2006)

just too add to your write-offs and this topic.  .

you can also DONATE any extra amount OFF the top. Like cash, goods or services to your local artist community or other.....  



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## kippygirl12 (Nov 9, 2007)

*Lucy!*

*Is this Candian Tax law you are referring to? *

*If US, please explain further, site an example.*

*Thanks!*

*Gail*


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## badalou (Mar 19, 2006)

kippygirl12 said:


> *Lucy!*
> 
> *Is this Candian Tax law you are referring to? *
> 
> ...


USA.. Your website is advertising. Advertising is a deduction.
All fees related to your website as in hosting fees.


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## binki (Jul 16, 2006)

Also consider this for removing part of the 15.3% FICA tax.

Lease your home office to your business
Loan your business money and get a reasonable rate back

While you will pay income tax on this you will not pay FICA which is 15.3%. 

Other expenses include travel to the ISS show in Long Beach, all airfare, car, taxi, hotel, 50% of food, misc expenses, etc. 

Also, don't forget to combine business with personal when traveling. You can take the business portion off as an expense.


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## binki (Jul 16, 2006)

badalou said:


> USA.. Your website is advertising. Advertising is a deduction.
> All fees related to your website as in hosting fees.


Don't forget your ISP for internet access!


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## badalou (Mar 19, 2006)

binki said:


> Don't forget your ISP for internet access!


so true.. and updates that your web designer may charge you. and if you are doing your own web site the software you used. also if you are a designer the cost of your software.


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## T-BOT (Jul 24, 2006)

kippygirl12 said:


> *Lucy!*
> 
> *Is this Candian Tax law you are referring to? *
> 
> ...


Hi-ya Gail, great to see you on the board.  

yep, in Canada and the USA I think the tax laws are about the same. 

I think any expenses you take on in order to earn Income, it can be deducted. A good example is your website expense as mentioned.

Donations are a little different but anything to do with PROMO expense it is a 100% deduction, within limits of course.


Now in Europe, from what i have been researching relating to taxes, payroll and business in general, let me tell you that there are some differences from what i'm use to.


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## badalou (Mar 19, 2006)

> *I have done very very well on Ebay...however, the govt hasn't figured out how to tax ebay yet...so I'm not claiming it this year. *


Then you better hope an IRS agent is not reading this. If you have established a business and are selling the merchandise on Ebay then you have made taxable income after expenses. Go to Internal Revenue Service anddownlaod section C forms. that may help. Get the instructions as well.


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## badalou (Mar 19, 2006)

badalou said:


> Then you better hope an IRS agent is not reading this. If you have established a business and are selling the merchandise on Ebay then you have made taxable income after expenses. Go to Internal Revenue Service anddownlaod section C forms. that may help. Get the instructions as well.


Also I think you are talking about sales tax.. that is differnt then Federal tax.


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## KCINNV (Aug 12, 2007)

This site is very helpful, but people that aren't accountants,CPA and etc. should be careful when giving out tax information/advise. I've heard people, not on this site, live by the deduct as much as you can can and claim as little as you. As mentioned before, whether it's sales tax agents or business tax agents, they do go "under-cover" so to speak and try to catch people that are trying to evade paying taxes. I've seen it recommended countless times on this site to consult a lawyer (copyright infringement), but I can't say that I've seen it recommended as much to consult a reputable CPA. Remember, some of the most notorious criminals were brought down by the IRS, so be careful.


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## rrc62 (Jun 2, 2007)

badalou said:


> Then you better hope an IRS agent is not reading this. If you have established a business and are selling the merchandise on Ebay then you have made taxable income after expenses. Go to Internal Revenue Service anddownlaod section C forms. that may help. Get the instructions as well.


I think Paypal now reports to the IRS if you transfer over a certain amount to your bank account. I'm not sure what the number is.


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## karlking85 (Sep 26, 2007)

K.C., what you said is absolutely right, but all the deductions that have been mentioned thus far are totally legitimate claims. And as long as no one is trying to fraudulently evade the tax situation, or creating deductions that are not on the up and up, they should be fine. 

Most important note to consider: you should always, ALWAYS, have receipts and documents to support all of your deductions, without exception. But I would assume any businessman or woman worth their salt should know this by now. Just a heads up for the newbies out there.


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## T-BOT (Jul 24, 2006)

oh, just remember that more expense receipt amounts than sales is not good. It means you're not making money.  



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## mtmob (Apr 21, 2007)

badalou said:


> USA.. Your website is advertising. Advertising is a deduction.
> All fees related to your website as in hosting fees.


 
Hey Lou, 

How about search engine optimization???


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## gooup (Sep 20, 2007)

OK, now where can i find this info in plain English for idiots like me?



binki said:


> Reference: Tax Law Changes for Businesses


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## Annie57 (Nov 26, 2007)

Hello!!

I checked with paypal, they DO NOT report to IRS. :

Thanks, Annie


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## rrc62 (Jun 2, 2007)

Annie57 said:


> Hello!!
> 
> I checked with paypal, they DO NOT report to IRS. :
> 
> Thanks, Annie


I wouldn't count on that. It doesn't make sense that the government would not keep tabs on a service that would allow the transfer of large amounts of money undetected. The articles I've read recommended not allowing your Paypal account balance to go over $2000.


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## binki (Jul 16, 2006)

KCINNV said:


> This site is very helpful, but people that aren't accountants,CPA and etc. should be careful when giving out tax information/advise. I've heard people, not on this site, live by the deduct as much as you can can and claim as little as you. As mentioned before, whether it's sales tax agents or business tax agents, they do go "under-cover" so to speak and try to catch people that are trying to evade paying taxes. I've seen it recommended countless times on this site to consult a lawyer (copyright infringement), but I can't say that I've seen it recommended as much to consult a reputable CPA. Remember, some of the most notorious criminals were brought down by the IRS, so be careful.


Nobody has said consult an attorney or a cpa more than I on this site. I will add the disclaimer to my post. I also used a reference in my post and the material is pretty much from that reference. Thanks for noting my oversight. 

Now, as far as tax evasion, I would never advocate that. It is illegal. Tax avoidance is not and we should take advantages of tax incentives the government gives us. The Section 179 tax incentive is there to get small businesses to spend money on capital equipment. This stimulates the economy and creates tax revenue for the government. There is nothing wrong, immoral, or evasive about it. Buy a piece of equipment for your business, write it down the first year, save on taxes that year, generate revenue with it, pay taxes on the revenue. Pretty simple.


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## binki (Jul 16, 2006)

gooup said:


> OK, now where can i find this info in plain English for idiots like me?


try Tax Guru-Ker$tetter Letter, Ker$tetter Letter®, and the somewhat dated Self Employed Advice and Resources - Self Employed Web


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## rrc62 (Jun 2, 2007)

gooup said:


> OK, now where can i find this info in plain English for idiots like me?


You should ask an accountant. The provision has been around fr a few years, it was just increased this year. In past years it has been $20,000. It is there to provide an incentive for businesses to go out and spend money on new equipment. It can't be applied to regular business expenses, only capital expenditures. There is no cap on normal business expenses. The benefit is that normally you would buy the equipment and depreciate it over time until after 7 years or so you have written off the original cost 100%. Under this provision, you can take 100% of the equipment cost up to $125k the first year.

The downside is that if you sell the equipment you would have to pay capital gain on whatever your depreciation schedule says it's worth. If you depreciate the equipment over time, the deductions follow the depreciation so if you sell the equipment, the selling price is usually close the depreciated value and there are no capital gains.


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## 2STRONG (Oct 17, 2007)

All The Things Are Not Illegal And Are Lagitamite Ways To Deduct Things On Your Taxes . Sometimes People Are Not Aware Of What They Can Deduct So Somerhing Like This Thread Is Good. Just Double Check With Your Cpa Or Tax Agent. Does Anyone Use This One . Wording Might Be Off But It Is Legit. Get A Po Box Which Most Of You Have Make Sure To Check You Po Box Everyday Before You Drive To You Fulltime Job And You Can Deduct Your Miles From Your Po Box To Your Job Which Will Save You Lots. The Rules State That If Driving From Home To Work Is Not Deductable But After Your First Job (checking Po Box For Shirt Buisness) Then Driving To Your Fulltime Job Is Considered Going To Your Secong Job Therfore The Miles From Your Po Box Is Deductable. Warning!! Try To Maintain The Same Deductions Year After Year Changing Deductions Every Year To Find The Best Deal Will Flag You. Oh! Also Did You Know That You Cant Have A Couch Or Bed In You Office, Such Things Cause You Not To Be Able To Claim It As A Home Office. So If You Ever Get Audited Get That Stuff Out Of There Till Your Done.


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## Rodney (Nov 3, 2004)

> This site is very helpful, but people that aren't accountants,CPA and etc. should be careful when giving out tax information/advise.


I agree. All these great tips should only be taken as suggestions you should ask your tax adviser about. We aren't giving out tax advice here, just pointing out some things you should look into.


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## OpulentClothing (Nov 26, 2007)

If I may ask simply for my own clarification:


Equipment and supplies ( up to 125K) can be written off to the amont 100%? Ofcoarse, as far as food, the IRS sees it as you have to eat anyways so you can take only 50% for business dinner.


Lastly, you are saying write offs are only allowed for the first year or is this something you can do yearly up to certain amounts?


Cory
Opulent Clothing


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## binki (Jul 16, 2006)

Accelerated depreciation is allowed the first year only. After that follow the MCARS schedule. 

The $125K is the max of accelerated depreciation. This is phased out as you purchase capital equipment that totally costs over 4x that amount in the same year. It is a 'small business' tax incentive. 

Normal depreciation is unlimited.


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## eclektik (Nov 15, 2007)

good stuff
I think i'll be talking to a CPA soon


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