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#275802 - 11/14/09 02:13 PM
Re: A tax question
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Senior Member
Registered: 12/08/02
Posts: 15560
Loc: Forest Hill, MD USA
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You can only use the deduction in the year it is paid. I'm not sure about your second question, but I don't believe you can carry over the deductions without placing them on a depreciation schedule. Some purchases, particularly the larger ones, can be put on a depreciation schedule, which allows you to use the deductions over a specific time frame. However, this usually applies to major purchases such as a vehicle or building. If you use Turbo Tax to do your income tax you will find this information in the program. Good Luck, Gary
_________________________
PSR-S950, TC Helicon Harmony-M, Digitech VR, Samson Q7, Sennheiser E855, Custom Console, and lots of other silly stuff!
K+E=W (Knowledge Plus Experience = Wisdom.)
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#275803 - 11/14/09 02:16 PM
Re: A tax question
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Senior Member
Registered: 12/08/02
Posts: 15560
Loc: Forest Hill, MD USA
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Larry,
One thing I forgot about for next year is you can get a major deduction by setting up a retirement account. Essentially, you'll be paying yourself and getting a tax deduction in the process. The amount you can place into retirement will depend upon your age at the time of the contribution.
Good Luck,
Gary
_________________________
PSR-S950, TC Helicon Harmony-M, Digitech VR, Samson Q7, Sennheiser E855, Custom Console, and lots of other silly stuff!
K+E=W (Knowledge Plus Experience = Wisdom.)
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#275805 - 11/16/09 11:56 AM
Re: A tax question
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Senior Member
Registered: 01/02/04
Posts: 7285
Loc: Lexington, Ky, USA
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Gary is right. Depending on the size of the purchase, you can depreciate the amount; usually over three years. There are various depreciation methods (eg. straight-line, sum of the years didgets, accelerated, etc.).
The depreciation legality really has nothing to do with the financing scheme, except that you can depreciate the TOTAL cost, including interest.
You can depreciate a piano over thrre years, for instance, even though it takes you five years to pay for it.
Of course, once you depreciate an asset, you have to pay capital gains tax when you sell it. The tax is on the difference between the book value of the asset after it is depreciated and the sale price. That's a major consideration for me with the guitars in my collection, which all are eventually are depreciated to zero.
Working musicians need to be familiar with the tax laws that apply to the way you've set-up your business (Proprietorship, Incorporation, LLC, etc.).
Turbo Tax is good, but, in my mind, at least, if you're generating significant revenue, a CPA is better.
Russ
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