Self Employment Write-off

[Jengland86]

I'm starting an art and clothing company and bought an old school bus that I'm currently renovating into a mobile shop with storage and displays for inventory and a bed/bathroom so that I can take the bus to art and trade shows across the country. The initial school bus cost was only a few thousand dollars, but the total renovation cost will be about $35 to $40k to have it sufficient for my mobile business. This is not a luxury vehicle purchased for a business. Am I able to write off this entire expense in one tax year or does it need to be depreciated over so many years? I'd like to write it all off at once as I had to take out my pension to cover the cost and would like to make the best use of the writeoff for this tax year. Also, I am purchasing all of the printers, software, and materials needed to get the business up and running. Can this all be written off for this tax year at one time? I haven't filled the llc yet, does this need to be completed this year as well? I imagine it'll take several months to get everything going... into 2022. Since I'm a self employed person and took out the pension for myself (to use for business expenses) is an llc even necessary for the business writeoffs at this time? One more thing... I moved in 2021 and the bus I'm building for my business and have hired a contractor to help with is over 2 hours away from my home. Therefore, in order to work on it, I'm having to rent a hotel to stay nearby. Am I able to write off this as a business expense? There aren't many contractors that can do this type of work and this was the closest one I could find. I'm helping with the renovation to reduce cost.

Please let me know if you have additional questions.

Thank you!

[Critter-3]

None of the bus purchase or upgrading can be deducted until it is placed into service which sounds like that will not happen until 2022. 

[Critter-3]

If you are new to being self employed, are not incorporated or in a partnership  and  are acting as your own bookkeeper and tax preparer you need to get educated ....  

If you have net self employment income of $400 or more you have to file a schedule C in your personal 1040 return for self employment business income. You may get a 1099-Misc for some of your income but you need to report all your income.  So you need to keep your own good records. Here is some reading material……

IRS information on Self Employment….
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center 

Publication 334, Tax Guide for Small Business
http://www.irs.gov/pub/irs-pdf/p334.pdf 

Publication 535 Business Expenses
http://www.irs.gov/pub/irs-pdf/p535.pdf 

Home Office Expenses … Business Use of the Home

https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction

https://www.irs.gov/pub/irs-pdf/p587.pdf

Publication 946 … Depreciation

https://www.irs.gov/pub/irs-pdf/p946.pdf

                      

There is also QuickBooks Self Employment bundle you can check out which includes one Turbo Tax Self Employed return and will help you keep up in your bookkeeping all year along with calculating the estimated payments needed ....
http://quickbooks.intuit.com/self-employed

          
Self Employment tax (Scheduled SE) is generated if a person has $400 or more of net profit from self-employment on Schedule C.  You pay 15.3% for 2017 SE tax on 92.35% of your Net Profit greater than $400.  The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare.  So you get social security credit for it when you retire.  You do get to take off the 50% ER portion of the SE tax as an adjustment on line 27 of the 1040.  The SE tax is already included in your tax due or reduced your refund.  It is on the 1040 line 57.  The SE tax is in addition to your regular income tax on the net profit.
 


PAYING ESTIMATES
For SE self employment tax - if you have a net profit (after expenses) of $400 or more you will pay 15.3% for 2017  SE Tax on 92.35% of your net profit in addition to your regular income tax on it. So if you have other income like W2 income your extra business income might put you into a higher tax bracket.

You must make quarterly estimated tax payments for the current tax year (or next year) if both of the following apply:
- 1. You expect to owe at least $1,000 in tax for the current tax year, after subtracting your withholding and credits. 
 
- 2. You expect your withholding and credits to be less than the smaller of: 
    90% of the tax to be shown on your current year’s tax return, or 
  100% of the tax shown on your prior year’s tax return. (Your prior year tax return must cover all 12 months.)

To prepare estimates for next year, You can just type W4 in the search box at the top of your return , click on Find. Then Click on Jump To and it will take you to the estimated tax payments section. Say no to changing your W-4 and the next screen will start the estimated taxes section.

OR Go to….
Federal Taxes or Personal (H&B version)
Other Tax Situations
Other Tax Forms
Form W-4 and Estimated Taxes - Click the Start or Update button

[Jengland86]

Thank you for the response. I am not new to self employment. I have an S Corp for consulting.  I am new to this type of business though. 

[Rick19744]

Well there is a significant difference between an LLC and an S corp with respect to SE Tax.  One is subject to it and the other is not, so essentially you are new to SE Tax.

You may have made estimated tax payments in the past related to the S corp, assuming it generated income, but the LLC will be generating both SE Tax and regular income tax.

The above assumes that the LLC will not be treated as an S corporation.