Question
Section 179 tax deduction for a first timer...?
Hi there, this is a followup question I had about working freelance and claiming the equipment on my taxes... I did a little exploring on the web and found a website made simply for Section 179 of the tax code which allows you to deduct equipment that a business (or freelancer) has bought for their business. I am up for a freelance job working as a videographer. I will definitely have to buy a new HD Camera (which I do not currently own) and a few other things, possibly a new Macintosh computer. I see that computers are covered in Section 179, but not cameras. What I am planning to do (if I get hired) is to buy this new equipment, and then claim it on my taxes for that year...is it possible with Section 179 that I could possibly get most, if not all of the money back if the equipment is being used specifically for my new job? I am brand new to this and don't want to make a mistake here claiming it on my taxes, only to be told "sorry" by the government. So, any tax gurus out there, or freelance people willing to help a new guy out here? Thanks! T
4 weeks ago - 3 answers
Best Answer
Chosen by Asker
You can take 179 only if you actually make any money on your business, otherwise you have to just use regular depreciation. Both the camera and the computer will qualify. I don't know what you mean by "all the money back." It works like this (assuming you're on Schedule C): Suppose you make $10,000 in your new gig. You should get a 1099 from the company next year. Then, you have $4,000 in expenses for traveling, food, office supplies, whatever other small expenses there are. Then, you also purchase equipment costing $12,000. If you decide to take 179, you can reduce your income to zero. Your deduction would be limited to 6k (10,000 - 4,000). You will show zero income and then report a carryover of the balance (12k-6k) that you can use in a subsequent year. If you don't have any income, you can't use 179. You'll have to use regular MACRS depreciation. See IRS publication 946 for more information on how to depreciate.
Source(s)
tax pro
by darkrose7
4 weeks ago
Asker's Rating: 
Other Answers
Let's say the gig pays you $5000. Let's say the equipment costs you $10,000. No you will not get a $5000 refund. No you can't claim all $10,000 and use it to offset other income. And, if you use the computer for less than 50% for business, you can't 179 it.
by the tax lady- 4 weeks ago
Dear S: Depreciation is not a week end project for the uninitiated. Get some help the first year. If you are just starting the business you will be a Sole Proprietor and will use Sch C to report your income and expenses. It is common to have a loss the first couple years when starting a new business. The IRS gives you 2 years and then expects a profit or they say you just have an expensive hobby. If you have another job and income this "videographer" gig will help reduce your taxable income if you do not make a profit the first year. Play the 179 deduction and other depreciation against your income this year and projected income next year. Why 179 all of the equipment if you do not need all of the deduction. This advice was prepared based on our understanding of the tax law in effect at the time it was written as it applies to the facts that you provided. Click on my profile to read more. Errol Quinn Enrolled Agent
by hrblockerrolquinn- 4 weeks ago