Thursday, October 1, 2009

Tax Question for my freelance job. Thanks

Tax Question for my freelance job. Thanks?
Hi, I live in California and I have been doing some freelance work besides my full time day job, the freelance work I do generates about $3000 worth of extra income per month. A couple friends of mine have been telling me the possibilites of putting some expenses as tax deductions for the income I get from freelancing. Expenses such as computer purchase, car lease payments, cell phone bills...etc Can anyone give me an estimate on how much % of the expense are deductable for some of the items I mentioned? Such as if I buy a $3000 laptop, how much of that would go into tax deduction? thanks so much for helping
United States - 2 Answers
Random Answers, Critics, Comments, Opinions :
1 :
You will have to show that any expense is job related and "ordinary and necessary" to do your job. If an items is used for both personal and business use, you will have to keep logs of use and would only be able to deduct the business use. Deductions for cars are limited to prevent a business person from writing off a sports car vs. buying a cheaper sedan. Assuming you can justify the computer, what percentage of the time will you use it for work? Do you already make a lot of long distance calls for work? How have you been making those calls? The IRS believes that a portion of the calls made will be personal and doesn't like to allow deductions for personal use. If you don't have another phone, they may claim the base charge is all personal. Where in your current job do you drive? If you buy a car, what percentage of the distance will be personal?
2 :
For your freelance work you will complete schedule C (Form 1040) where you can deduct your business expenses. This includes car mileage/car lease payments and phone bill based on percentage of business use. The computer/laptop is capital expense. Normally you take depreciation for capital expense. However, if you use such goods for more than 50% for business you can deduct full amount under section 179 deduction. The business use must continue for five years. For completing your tax return you should use software and do it yourself or use a tax preparer. Software will guide you about section 179 deduction.

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