Tax question (late '06 vs. early '07 tax trap)

Sorry guys... I used the search function extensively, but the hits are so vague when it comes to specific tax questions. I have an appointment with H&R Block in early December, but I wanted to throw this out.

I've managed to rake up about $8,000 in tax deductions this year since I started my business in October (this includes the $$$ that I am paying to various models)

What really sucks is... I either need to deduct 100% of the expenses this year as Section 179 and operating costs (immediate deductions), or I must depreciate most of them over 5 years or so if I declare them as "start up costs" because my income will not start to come in until 2007.

So under 179, I get a bigger tax return this year (about $1,200 more)... but that $8,000 would be better off deducted in 2007 since it would lower my taxable income and not be subject to that whopping 28.6% tax (costing me $2,288!!)

Is there any way to delay a section 179 deduction until the following tax year? I don't want to end up paying an extra $1,000 just because I started the business late in the year and won't have business income until '07

Any tax experts in here?

I hope this is somewhat related to your question, otherwise I apologize for hijacking your thread. :D

Good question. I have no idea what a Section 179 is. But I have always wondered if people amortized content purchases over a period of years or took the deduction in the year of the purchase.

Section 179 is equipment that normally would be depreciated over 3 or 5 years, such as computers, cameras, software, etc... but the IRS lets you take 100% of the cost as a deduction right away, even if you purchase it on December 31st at 11:59pm.

Otherwise, a $3000 computer would have to be depreciated for 5 years.

Oh and I recalculated... the expenses that I would be required to deduct under Section 179 amount to only $3,800... so the tax savings for me would be not as high as I thought. About $550.

But still... that's 500 bucks!!!

Quote:

---

Originally Posted by Xstr8guy

But I have always wondered if people amortized content purchases over a period of years or took the deduction in the year of the purchase.

---

To the best of my knowledge, we've always taken the deducation in the first year :)

Regards,

Lee

the best investment I ever made was to get an accountant who knows what they are doing and to get a professional opinion on my situation, you should do the same!

cheers,
Luke

Be carefull with them. I was a "tax expert" for them a few years back. They take people off the street basically and run them through a two day course on how to run their software (which by the way is basically TurboTax). You would do much better to find a local accountant in the gay paper in your area. Just my 2 cents.

Quote:

---

Originally Posted by Lee

To the best of my knowledge, we've always taken the deducation in the first year :)

Regards,

Lee

---

Ah thanks! That's what I thought.

there are 2 h & r blocks - the regular ones and their corporate ones. they are separate offices (you won't find their corporate guys in the regular offices) and the corporate guys we talked to once seemed to know their stuff.

and of course, they cost more - but experienced and knowledgeable help does. the first year we started in this biz, we tried block and they couldn't even begin to figure our stuff out - not only the regular people but their manger/trainers, as well. luckily for us, they couldn't help us but they were honest about it.

while i would never consider going to h & r block now, if i did, i'd go straight to corporate and not mess around with the regular h & r block guys.

btw, we usually take the full deduction the first year but we did depreciate a couple things.