4/23 Let's say I design a web site for my mom's friend who paid me $100
for the job. I'm fine with paying tax on my extra $100 income as
my side job. Can I deduct tax for buying a $2000 computer + monitor?
Do I have to do the LLC thing, and is there anything else I have to
do to deduct for buying equipments?
\_ You can't deduct more than you made. But if you make $2K on the side,
you can deduct $2K.
\_ I don't think it's quite so simple. I think you can only
deduct the fraction of $2k that you've devoted solely to
your side business. I.e., you can't deduct your 95% gaming
machine as a 100% business expense, but you could deduct
5% of it. In practice, I don't know how they could possibly
enforce this, and I could be completely wrong about this:
what I advise is that you look into this carefully and
perhaps consult an actual professional.
\_ They enforce it by auditing you.
\_ And how does that work? "Of course I used this
computer 50% for work!" "Did not!" "Did too!"
\_ 50% maybe. But if you deduct a 2k expense on
a 100 dollar job and you get audited they will
tell you you are full of it and make you pay.
It's blantent dude.
\_ No, you can lose money "consulting" for at least
three years before the IRS starts to get riled up.
They understand that new businesses often don't make
any money for a while.
\_ My accountant wrote this to me: Expenses related to job are summed
up, and if the total exceeds 2% of income, the "excess" amount is
included in "itemized deductions". Also, you can only report the
"business portion" (generally 60%) for tax purpose. And in the case
of a computer, it has to be depreciated over 5 years. So, it may
not be as useful as you've heard." So I have no idea what the
last portion of 5 years means...
\_ it means you can only deduct 20% of the business percentage
of the computer's cost each year. So a $2000 computer used
50% for business, you can only deduct $200. -tom |