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Julian Block’s Tax Tips for Stock Photographers (Part 1)

April 3, 2009

Julian Block’s Tax Tips for Stock Photographers (Part 1)

PhotoEdit is proud to be working with Julian Block, an attorney and leading expert on taxes from Larchmont, New York, on a series of articles about tax tips for stock photographers. We are grateful to Julian for his time and his expertise. In this first article, he explains the difference in tax rates for photography as a hobby as opposed to photography as a business.

Q: I’ve been into photography for ten years. I’ve spent a lot of money on digital equipment. Can this be a tax deduction for me?

A: Generally speaking, no deductions are allowed for hobbies unless your hobby is earning you some money. Turn your hobby into a business and reap the deduction benefits.

Q: Do I pay taxes on any profits that I make from my photography?

A: Yes, just as a regular business would.

Q: Are my expenses deductible?

A: Expenses such as software, scanners, cameras, airline flights, office equipment, business faxes and phone calls, ISP fees, etc., are all deductible, but if your photography is deemed a hobby according to the IRS, they are deductible only up to the amount of income.

Salvadoran young woman wearing red sweater fills out tax forms

Q: What does that mean?

A: Assuming stock photography is not your principle business and that you are employed elsewhere or are self-employed in a different type of business, you need to show your photography is a business, not just a hobby. (You have a photography business checking account, business stationery, records of photo submissions to markets, etc.) A business that is a real business and not a hobby can show a loss and use that loss offset other income (even a salary) in figuring your taxes.

Q: How do I explain to the IRS that I’m trying to make my stock photography a real business?

A: Technically speaking, the IRS has a three-year rule: if you do not show a profit for at least three out of five consecutive years, the IRS can declare your “business” to be a hobby and disallow any losses that you have declared.

Q: You mean I would have to pay a penalty?

A: Yes. But this would be a rare case. The IRS has been lenient in cases like this, especially in the area of the arts, such as photography. If your paper trail (your invoicing, purchasing, photo submissions, and income records) indicate to the IRS that you have shown “intent” to make a profit, and you are not abusing the Tax Code, the IRS will no doubt approve your deductions. In fact, many small businesses go many years without showing a profit.

White male school principal wearing shirt and tie fills out his tax return in his office

Q: How can I best show that I “mean business”?

A: Open a checking account in the name of your business. Apply for and get a Tax ID number (it’s free). Contact a printer and order professional-looking stationery, business cards, and invoices. Set up a website and get a local “dba” (“doing business as”) license.

Q: To get my pictures, I have to travel far and wide. Is my travel expense a deduction?

A: Again, if you can show the IRS that you “mean business” by operating in a professional manner, and you are contacting markets to sell your photos (sending out emails, inviting potential customers to your website), then your chances are good that all travel deductions for your photography-related trips will be deductible. Expenses that are not related to your stock photography business while on the trip are definitely not eligible as tax deductions. As for receipts, your pictures are additional good receipts because they show that you actually traveled to the place you reported.

This concludes the first article in the Tax Tips for Stock Photographers series. Stay tuned for follow-up articles. Julian Block, an attorney in Larchmont, New York, has been cited as a “leading tax professional” (New York Times), “an accomplished writer on taxes” (Wall Street Journal), and “an authority on tax planning” (Financial Planning Magazine). The information in the above article is excerpted from 2009 Tax Tips Guide for Stock Photographers. For more of Julian’s articles and to order his books, please visit julianblocktaxexpert.com. Copyright 2009 Julian Block. All rights reserved.

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