Starting a freelance art business

[TraveLynn]

I’m trying to jump start a fine art photography business & have, between last year and this, spent quite a bit on supplies, framing, and entering competitions for exposure and credibility, etc. Last year I didn’t have any income from my work yet, although I had start up expenses, so didn’t write any of it off. This year, so far, I won a prize in a photo competition, but only have $24 in sales. How does that work for my taxes? Are prizes from related work counted as earned income or something else? And can I write off the cost of supplies leading up to the prize (the winning acrylic print was paid for in 2021, but the winner wasn’t announced and prize money paid until 2022). 

Also, I’m looking at using some of the prize money on a new laptop (mine is 7 years old and Apple now considers it obsolete) and photoshop software, and a DSLR camera for the business. Do I get to write that off?

Any help is appreciated! Thank you

[JaredS_CPA]

Hello TraveLynn,

Thank you for participating in our Ask the Expert event today. As to your question, you can write off your expenses from last year even though you didn't have any income. Whatever doesn't offset any other ordinary income can be carried over to this year to offset the prize money. So, yes, the prize money would be considered income and you can expense the cost of supplies regardless of the prize because it is an expense of your business. As to the laptop, software, and camera, yes, you can also expense that. Depending on the cost, you will most likely have the option to expense it all in one year or spread it out over a few years. It'll be your choice when you go through the TurboTax questions on the matter. I hope that helps.

[TraveLynn]

That helps a lot, thank you!