Benefits / Resources / Articles
February 28, 2024

Navigating the Business Side of Photography: How to Handle Tax Season

Taxes aren’t fun, but by taking a proactive approach instead of putting them off, you’ll establish yourself as a true photography professional. Let’s explore the business aspects of photography that affect your tax preparation. Then, we’ll share crucial advice for accurately completing your taxes while claiming all relevant deductions.

Understanding the Business Aspect

How do you know when you’ve transitioned from a hobby photographer to a full-time career photographer? Let’s review the IRS guidelines on this critical point.

“A hobby activity is an activity not done for profit,” explains the IRS. “This includes activities done mainly for sport, recreation, or pleasure.” So, if you’re earning money from your photography endeavors, the IRS would probably consider it a business—meaning you owe taxes.

As a self-employed individual, you’re responsible for making your own tax payments. If you’re likely to owe more than $1,000 a year, you need to make quarterly tax payments. And if you earn more than $400 in a given year from your photography, you need to file an annual tax return. 
Visit the IRS website to explore this topic further.

Financial Responsibilities

Put your quarterly tax deadlines on your calendar so you stay current with your taxes. The IRS presents these deadlines on its website. You can pay these taxes using several different methods: online, by mail, over the phone, or through the IRS2Go app

If you don’t pay your quarterly taxes by these due dates, you’ll probably have to pay a fee at tax time, unless you are eligible to have it waived. But if you’re late for a payment, simply pay it as soon as you can. This may minimize the fee you owe, as interest accumulates for these penalties.

Use the IRS Form 1040-ES to estimate your quarterly tax payments. It walks you through relevant deductions and credits. Use the IRS tax withholding estimator tool to calculate approximate amounts to withhold, too. As a general rule of thumb, try to reserve 30% of your total taxable income for taxes.

Legal Structure

Setting up your business as an LLC offers certain benefits, like legal protection and legitimacy. Establishing an LLC can protect you from personal liability for some mishaps. As an LLC, your business becomes its own entity; if you were ever sued by a dissatisfied client, your personal assets (like your home) couldn’t be seized.

Setting up an LLC can also bring tax benefits. As an LLC, you can opt to be taxed as an S corporation or a sole proprietorship, depending on which option is most advantageous to you.

Creating the LLC involves a few key steps, like filing articles of incorporation and writing up an operating agreement. You’ll need to keep your business bank account completely separate from your personal account. Working with a professional will ensure you flawlessly complete each step of the process.

Tax Forms and Deductions

Let’s review several common IRS forms that photographers should know about. 

  • You can deduct expenses like equipment purchases and studio rentals from your taxes. When filing your taxes, you’ll use IRS Form 1040 to list itemized deductions.
  • Then, you’ll use Form 4562 to indicate depreciation of capital expenses like equipment. You can even depreciate the portion of a car purchase used for business. Keep careful records of all vehicle expenses related to your business so you can deduct them accurately.
  • If you’ve contracted an assistant to help with scouting, photography, editing, or other tasks, and you’ve paid them at least $600, you’ll need to issue them a 1099. You may also need to issue them to individuals (not corporations) that you’ve rented equipment or facilities from. The IRS provides official 1099 forms that you can fill out, send to these individuals, and file.

Look up your state’s sales tax rules to be sure you tax all relevant products and services, too. Some states opt to tax services while others just tax products (like photos).

Stay organized throughout the year to streamline your tax prep. Use bookkeeping software or even a simple spreadsheet to track all expenses and income. Specify the date of purchase for equipment, amount, description and serial number, and how you plan to expense it (e.g., as a larger single deduction for the current year or through depreciation over a five-year period). 

Operating Costs

We’ve compiled a list of common deductions for photographers. Make sure you don’t miss out on any that apply to you!

  • Your photography studio, home office, or storage space. Estimate the square footage of the space used exclusively for business. Then deduct the percentage of your rent or mortgage interest used for this purpose, or the full cost of a separate space dedicated to your business. Also deduct the relevant portion of your utilities and internet costs.
  • Venues rented for photo sessions. 
  • Equipment, from cameras and lenses to data storage devices. You can either deduct the upfront cost or the estimated depreciation of the equipment for the past year. 
  • Props used for sessions.
  • The portion of cell phone use for business calls. 
  • Advertising and promotional expenses.
  • Travel expenses: Deduct gas, mileage, and other expenses for traveling to photo sessions. 
  • Business lunches: You can deduct 50% of meals with clients.
  • Wages for any assistants you contract for photo sessions.
  • Office supplies, like envelopes, stamps, planners, and paper. 

The IRS lets you use a simplified method of calculating the portion of your home used for business. Using this method, you can deduct $5 per square foot, with a maximum of 300 square feet per year.

Additional Deductible Expenses

Be sure to deduct any trainings you’ve invested in as well, along with conferences, magazine subscriptions, and books related to professional growth. You can deduct meals, travel, and lodging for trainings you attend as well.

Be sure to deduct website costs, insurance for your equipment, software, and professional memberships.

By taking your taxes seriously, you’ll level up as a small business owner. Hiring a pro to help will ensure you don’t miss a beat when it comes to reporting requirements and deductions—like your annual PPA membership!