Last-minute Deductions

It’s everyone’s favorite time of the year: tax season!

OK, we’re kidding. Not many people outside of the accounts receivable departments at CPA offices look forward to tax time. Nevertheless, it’s one of life’s true inevitabilities. As Benjamin Franklin once said, “Nothing in this world can be said to be certain, except death and taxes.” Instead of bemoaning the unavoidable, let’s look at some ways to potentially limit your tax bill.

If you run a photography business, you understand how quickly the costs add up. Fortunately, many of those costs can reduce your tax liability. The IRS allows self-employed individuals and small business owners to deduct certain business expenses from their income, which can reduce the total amount of taxes you owe. Exactly what you can deduct and how you take those deductions may depend on how your photography business is organized (sole proprietorship and S-Corporation are the most common). Talk to a licensed tax advisor about the best strategies for your individual situation.

There are some tax deductions professional photographers could consider. Be sure to first tally up all the allowable expenses from 2024 to maximize your deductions and keep more of what you earn without running afoul of the IRS.

EQUIPMENT EXPENSES

The gear you buy for your business is typically tax deductible. Money spent on equipment used for more than a year—cameras, lenses, lighting, accessories, and computers—is considered a capital expense. You can deduct capital expenses all at once during the year you purchase the items or deduct a portion of the expense over each item’s useful life through a process called depreciation. Depreciation spreads out the deduction into smaller amounts over several years.

Deciding which approach to take depends on several factors, according to Andrew Jordan, CPA, president of Big Picture CPA, a Missouri-based accounting firm that specializes in working with professional photographers. Those factors include:

Last year’s profit. If your profit was high last year, and the deduction is needed to offset income, then taking the full expense could produce an immediate tax benefit. Pro tip: Ask your tax advisor about bonus depreciation.

Future profits. If you think your household taxable income will be higher in future years, you may be better off saving some deductions for those years when you will be in a higher tax bracket.

State tax considerations. Some states don’t follow federal bonus depreciation rules, so expensing now could create state tax complications.

GENERAL EXPENSES

A long list of general expenses applies to most businesses, including photography businesses. Common ones include:

• Bank fees for your business account
• Business insurance, such as professional liability insurance
• Legal and professional fees, including invoices from accountants, lawyers, financial advisors, and marketing agencies
• Business licenses, permits, and registrations
• Interest on business loans, credit cards, and lines of credit
• Employee salaries and subcontractor fees
• Marketing and promotion expenses such as advertising, website hosting, and promotional items
• Phone expenses
• Studio rent
• Office supplies
• Payment processing fees for credit card payments
• Professional development like online courses and Imaging USA
• Software used for the business, including image editing applications, studio management software, and accounting software

HOME STUDIO

If you operate a home studio and have a dedicated workspace, you may be able to claim the home office deduction. Your home studio doesn’t need to be a separate room, but it must be used exclusively for your business. Your tax advisor can help you determine the percentage of your total home expenses to deduct based on the square footage of your home studio area. Items that could fall into the home studio deduction include:

• Rent (if you’re renting your home)
• Mortgage interest (if you pay mortgage)
• Renters or homeowners insurance
• Property taxes
• Utilities, including internet service
• Repair and maintenance
• Furniture and appliances for the studio space
• Renovations (in some cases)

AUTOMOBILE EXPENSES

If you use your personal vehicle for your photography business, you can deduct a portion of your vehicle expenses. Business use of a vehicle includes activities like driving to photo sessions, scouting locations, and traveling to meet with clients. It’s important to separate personal and business uses of your vehicle, so keep careful records and track the miles you drive for business purposes.

“Many business owners forget to track and deduct mileage,” says Jordan. “Especially for photographers with niches that involve travel, like wedding photographers, this can really add up. Use a mile tracking app like MileIQ or QuickBooks Online to simplify this process.”

The IRS offers two different ways to calculate vehicle expenses: actual expenses or standard mileage. When using the actual expenses method, add up all the costs of operating your vehicle during the year, and then divide by the percentage that you used the vehicle for business. For example, if 20% of the total miles you drove was for business, add up all your vehicle expenses and multiply by .20. Allowable expenses include things like gas, insurance, interest on your car loan, license, and registration, tolls, parking, repairs, and maintenance. If you use the standard mileage rate method, tally up your total business miles and then multiply by the standard mileage rate. For the 2024 tax year, that rate is $0.67 per mile.

OTHER EXPENSES

As a professional photographer, you can also deduct:

Business meals: Did you meet a potential client at a coffee shop? Did you have dinner with a vendor to discuss a partnership? When you have a business meeting over a meal, the IRS allows you to deduct 50% of the cost of that meal, including tips and taxes. “The key is to have a legitimate business purpose and to keep copies of your receipts,” says Jordan.

Business travel: If you traveled to far-flung locales to photograph your clients’ events, you should be able to deduct your unreimbursed travel expenses. Same goes for travel expenses to certain client meetings, professional events, conferences, and educational programs. The deductible travel expenses typically include accommodation, transportation (airline tickets, Uber rides, car rentals), fees to attend the event, and meals you purchased while traveling for work.

Self-employed health insurance: If you operate as a sole proprietor, you may be able to deduct your health insurance premiums, including dental and long-term care insurance. “You don’t qualify if you or your spouse is offered coverage through their work,” says Jordan, “but if that’s not the case, this can be a big savings.”

11TH HOUR DEDUCTIONS

You can’t retroactively purchase items or add business expenses to last year, but there are other ways to reduce your personal tax liability right up to Tax Day, which is April 15.

Retroactively log business mileage. If you did not track mileage in 2024, it’s not too late, according to Jordan. “As long as you recorded the dates and locations you traveled to for work, you can use something like Google Maps to establish how far you drove for the business during the year and deduct that mileage,” he explains.

IRA contribution. If you have a traditional IRA, you can make a 2024 contribution up to $7,000 ($8,000 if you’re 50 or older). You may be able to deduct some or all of that amount, depending on your income and whether you or your spouse is part of another work retirement plan.

Spousal IRA contribution. If your spouse doesn’t work or earns very little money, and you file a joint income tax return, your spouse can make a spousal IRA contribution, which involves funding their own IRA up to the contribution limit based on your compensation. If you and your spouse meet the criteria for a spousal IRA contribution, you could potentially double the amount of your deduction.

SEP-IRA contribution. Small business owners and self-employed individuals can set up a Simplified Employee Pension (SEP) plan as an option for retirement savings. If you set up a SEP in 2024 or earlier, you can contribute up to 25% of the salary your business pays you, and that contribution is tax-deductible.

HSA contribution. If you have a high-deductible health plan, you can contribute to a health savings account (HSA) up until April 15. Contribution limits for the 2024 tax year are $4,150 for an individual or $8,300 for a family. If you’re 55 or older, you can contribute an additional $1,000. That contribution is usually tax-deductible.

Saver’s credit. This one doesn’t involve any additional contributions, and it’s a benefit to those with more modest income levels. If your adjusted gross income is $38,250 or less ($76,500 or less if married filing jointly), and you’re making contributions to an IRA or workplace retirement plan, ask your tax advisor about the saver’s credit. This credit could be worth up to $1,000 ($2,000 if married filing jointly), and it’s a tax credit, meaning it reduces your tax bill dollar for dollar—as opposed to a tax deduction, which reduces your taxable income.

If you owed $3,000 in taxes before the saver’s credit was applied, you’d owe $2,000—a pretty good deal if it applies.

Jeff Kent is editor-at-large.