As a professional, self-employed photographer, the scary truth is that you now have a bigger tax responsibility. But the good news is that you are also entitled to deducting photography businesses expenses from your taxes. In this blog, I’ll talk about what business expenses you can take, as well as provide some tips to make your expense reporting easier. Finally, scroll down to the bottom to download a free business expense spreadsheet to use for your own business.
Before you get started, make sure you:
- learn about the various tax forms you need to fill out
- applied for a photography business license
- set up your photography business bank accounts
Photography Business Expenses and Tax Payments
- What are expenses?
- Photographer business expense categories
- How to keep track of business expenses
- Keeping track of business-related events
- Reconcile your accounts quarterly or monthly
- How I handle accounting on a regular basis
1. What are expenses?
One of the benefits to running your own business is the ability to deduct business expenses from your tax payments. In a basic sense, an expense is a cost required for something. When it comes to your photography business, an expense is a cost that occurs as part of operating your business. There are two types of expenses: fixed expenses, and variable expenses.
These are the costs that you will incur regardless of how many photo shoots you conduct throughout the year. Examples would be the costs for insurance, camera gear, etc.
On the other side of the spectrum are variable expenses. These are the costs of doing business that will vary depending on how much work you do throughout the year. Examples would include the costs for travel, renting equipment, hiring a photography assistant, etc.
2. Photographer Business Expense Categories – What you can write off
A photography business can deduct quite a few business expenses from its taxes. Below are some common photography business expenses sorted by category.
Business cards, directory listings, advertising, brochures, flyers, marketing or consultant fees, building and hosting a photography website, business logo design, marketing e-mails, promotional events, sponsorships, banners and posters.
Air, train, bus fare, rental car expenses, hotel expenses, Uber and shuttle fares, gas, parking fees and tolls, computer or internet fees while away, phone calls, the cost of shipping baggage, supplies, the cost of storing baggage or luggage, etc. All of these fees must be incurred during business travel to qualify.
Meals and Entertainment
Meals while traveling on a business trip or entertaining business associates. This is capped at a 50% deductible.
Sales commissions, fees for legal referrals, shared commissions, commissions paid to managers or agents that are not employees, fees to drop shippers or fees for online referrals.
Business phone line, cell phone service for business, long distance call fees, Internet service providers, video conferencing services, Internet routers and modems, etc.
If you paid an independent contractor/freelancer $600 or more for services on a project and didn’t withhold any taxes you need to send that contractor and the IRS a Form 1099-MISC. This could be part-time programmers for special projects, writers, designers or second shooters.
Legal and Professional Fees
Business related legal fees, association memberships (ie. PPA, WPPI), organization dues, accounting fees, short-term or one-time consulting fees for service such as management, marketing, bookkeeping, technical support, etc.
Health, long-term care, liability insurance.
Business credit cards, financial loans, and property interest.
Services related to managing your office or photo studio space. Examples include backup data and archiving services, cleaning, furnishing, and membership fees to places like Costco where you regularly buy things for your use in your office.
Office and Photography Supplies
Pens, paper, printer ink and toner, DVDs, stamps, mailers, flash drives, memory cards, shipping materials, storage and filing boxes, calendars and planners, scissors, tape, etc.
This would be gas, electric, water, trash collection. These expenses are only for your business office or studio. Home office utilities do not count as a business expense.
Repairs and Maintenance
Fees to fix your office space or equipment such as repairs of cameras or computers, maintenance of your studio space.
Computers, cameras, lenses, cameras, storage rental, studio space, vehicles to travel to photo shoot.
Taxes and Licenses
Business licenses and permits, professional licenses, real estate taxes for business property, incorporation fees, business name or search fees, copyright application and registration, trademark fees, etc.
Other Miscellaneous Expenses
Monthly software fees (ie. Adobe Creative Cloud, FreshBooks), bank charges, shipping and postage fees, business learning resources or classes, credit card or PayPal processing fees, conferences and conventions, start-up costs up to $5000.
3. How to keep track of business expenses.
Business expenses are great in that you can deduct them from your federal taxes. The downside is that you have to keep track of your business expenses in for them to qualify. Records you must keep include a receipt of proof of purchase and a note about the transaction’s purpose. Also, be sure to make all of your expenses from a separate business bank account.
Some might prefer tracking their expenses and accounting activity with spreadsheets. If you’re looking for an expense spreadsheet template, check out the free download below.
Download: Business Expense Spreadsheet
Accounting software has grown to the point where keeping track of business expenses can almost be automatic. FreshBooks, which I talked about in the last installment on starting your photography business 1, is a great option for an accounting software that you can access from any device at any time. If you drive a lot of business miles, I also recommend MileIQ, an app that automatically detects and tracks your business mileage.
4. Keep track of business-related events.
As a photography business, your calendar is your best friend. Google Calendar is a free solution that integrates with Gmail. I use it to input everything from daily schedules and routines to meetings and photo shoots. Besides helping with daily organization, you can search Google Calendar for past events to line them up with your photography business expenses. I set aside a couple hours every 2 weeks to go through my shoebox of receipts to input them into FreshBooks.
5. Reconcile your accounts quarterly or monthly
Sorting through 12 months worth of photography business expenses is not fun at all, especially when you’re on a deadline. I learned this the hard way during my first year of business as a photographer. I now sit down regularly with my FreshBooks account and make sure my business expenses are accounted for.
Consider hiring a professional bookkeeper
If keeping track of your photography business expenses seems tedious, you have two options to help:
- use an accounting software such as FreshBooks
- hire a professional bookkeeper to do it for you
Set aside 15% of your income for tax payments.
Tax rates vary. Generally, 15% of your sales or income is a good amount to set aside. Doing taxes for the first year of my photography business was painful. I filed annually that year and wrote an enormous check to the IRS. As a result, my tax preparer set my business up so that I make my tax payments in quarterly installments. It’s your choice whether you choose to pay your business taxes annually or quarterly.
Apply sales tax where necessary
Whether you charge a client sales tax depends on the business you run. In general, creative services will not have to worry about sales tax since they offer a service. However, say your client orders and receives something physical like a photo album or thumb drive of images. At this point, your photos have become products. A good rule of thumb is to charge your photography service as one item without sales tax and charge the product separately with sales tax included.
6. How I Handle Accounting on a Regular Basis
For most photographers, it’s not realistic to do bookkeeping every day. But you should sort through your photography business expenses regularly. This is how I handle my business bookkeeping:
- Charge all business-related expenses using my business credit card
- Save business expense receipts in a central location (for me, it’s a shoebox).
- Input all business activities and appointments into Google Calendar with details (ie. who you’re meeting, why, and where).
Every 2-4 Weeks
- Sit down with FreshBooks and update all bank transactions.
- Properly organize and file away business expense receipts.
- Reconcile all Google Calendar and MileIQ activities
Every Quarter (3 Months)
- Input tax due dates and set reminders on Google Calendar
- Send in quarterly business tax payments via snail mail.
- Email my tax preparer and give him access to my FreshBooks account
- Tax preparer files my annual tax returns and sends me the summary
- Federal tax return due dates: For split corporations, federal taxes are due March 15; sole proprietors or individual LLC have a federal tax due date of April 15.
Tracking photography business expenses is tedious, but it’s a part of doing your taxes legally. Use the resources and tips above to help set up a solid system for your new business. Any other resources you would recommend? Let me know in the comments below.