Deducting tools purchased for work from taxes

[ja29595]

There’s limited days left in 2016 and I just contacted my SO dealer; I’ve spent $4600~ on tools so far this year. Is it smart of me to purchase more tools to get above the $6300 standard deduction? I am not a homeowner and basically have nothing else to deduct other than my tool purchases.

I’ve deducted my tool purchases in the past but always been well over the $6300, so it was a no brainer. I just need some further explanation on the benefits of me spending the extra $1700+ at the end of this year. It seems like ‘free money’ to an extent, but I want to be sure since there isn’t anything that I desperately need to purchase right now.

 

[tdkkart]

I've never understood people spending thousands, just to save pocket change.
You need to figure out exactly how many $$$ you will actually save by spending $1700. Hopefully you'll be embarrassed that you even considered it.

You are allowed to deduct tools that your employer requires, I wonder what the limit is, and what happens when you quit that job and take the tools home after deducting $20,000??

 

[slip knot]

better to fund the IRA IMO.

 

[Know Wosad]

Hire an accountant to handle your taxes. It'll cost you a few hundred a year. Your internet"studies" are deductible. So is your camera-phone.....work clothes, gloves, eye exam.........welding helmet, first aid kit..guard dog.vet bills...dog food, alarm company.
Trip to SEMA
Do what 'they" do.
Paying taxes is for sheep
DONT go it alone. That'll get you 3 hots and a cot.
Hire a professional thief

 

[Know Wosad]

OH. You needed to have some shirts and hats made up to promote your company when you went tio SEMA. right ? That's deductible too. Don't forget the haircut and spa treatment.
Yes. You're away from home and have to eat out. Damn. It's also deductible.
Try the lobster

 

[md21722]

The bottom line is that its a DEDUCTION not a TAX CREDIT.

 

[tdkkart]

Hire an accountant to handle your taxes. It'll cost you a few hundred a year. Your internet"studies" are deductible. So is your camera-phone.....work clothes, gloves, eye exam.........welding helmet, first aid kit..guard dog.vet bills...dog food, alarm company.
Trip to SEMA Do what 'they" do.
Paying taxes is for sheep
DONT go it alone. That'll get you 3 hots and a cot.
Hire a professional thief

My brother and his wife hired a "professional" for a number of years, she was realtor so had many deductions that they too advantage of.

Then the professional mysteriously disappeared.

Went to 2nd professional who frantically said "WTF?? Holy ****!!, You can't do that!!!, Lets just hope we can get this straightened out voluntarily before they catch you........."

It cost them a LOT of money, our parents had to take their names off all the estate documents for a several years, but they finally did get it squared away.

 

[BFBOB]

You need more advice than you can get here!
You can have some free from me and worth every penny:

I think you can have it both ways just as if you were running a business - your expenses come out of your gross and you pay tax on what's left, and you can still take the standard deduction. I believe it's called "nonreimbursed employee expenses" or something like that. It's kind of like "nonemployee compensation" that allows you to declare miscellaneous income without having to set up a business and file Schedule C.

Don't take my word for this! Check it with a pro, or at least something like TurboTax!

 

[md21722]

You need more advice than you can get here!
You can have some free from me and worth every penny:

I think you can have it both ways just as if you were running a business - your expenses come out of your gross and you pay tax on what's left, and you can still take the standard deduction. I believe it's called "nonreimbursed employee expenses" or something like that. It's kind of like "nonemployee compensation" that allows you to declare miscellaneous income without having to set up a business and file Schedule C.

Don't take my word for this! Check it with a pro, or at least something like TurboTax!

A tax professional would be better here, but this is the summary:

"To claim most work-related expenses, you must itemize deductions. You can deduct only the portion of your work-related expenses that exceeds the IRS floor: 2 percent of adjusted gross income. If your 1040 says you must pay the alternative minimum tax (AMT), you cannot take work-related deductions."

If you need to depreciate the tools, it gets more complicated, with more forms.

Keep in mind you can itemize state income tax or sales tax.

 

[Empty Pockets]

My CPA tells me to save receipts, and to buy just what I need. Chasing after a tax deduction with cash money is "foolish". He tells me to keep the receipts as organized as I can, and drop them off well before April 15.

If it was me, I'd put that extra money in a retirement plan of some sort.

 

[SiGmA_X]

My CPA tells me to save receipts, and to buy just what I need. Chasing after a tax deduction with cash money is "foolish". He tells me to keep the receipts as organized as I can, and drop them off well before April 15.

If it was me, I'd put that extra money in a retirement plan of some sort.

This is the right answer. Source: I am a beancounter.

For a W2 mechanic/contractor/etc, you need to itemize and have misc expenses >2% of your AGI, and you can write off the amount >2% AGI. Self employed can deduct the expense on Sch C and it is not subject to the 2% floor. Thanks to Obama (really, its a plus) the de minimis threshold has an actual dollar amount set beside it as of 2013. If you have a CPA certified financial statement (most contractors/rather small businesses would not), you have a threshold of $5000 per item; if you do not, it is $500. You do need to have written documentation to support the method of expense vs capitalization that you employ.

26 CFR 1.263(a)-1(e) Example 1 (scroll down a bit)

Basically, hire a tax pro. I am far from one, but I understand this basic expense approach - I deal with it at my 5bn employer as I deal with our RE,FFE,PPE GAAP, STAT, and Tax accounting (as well as investment accounting which is what my *real* position is: see my initial statement, go invest the extra $ vs blow it on tools.)

 

[Roberts210]

Ask your CPA. I have always written off small tools as an expense.

 

[XxToolAholicxX]

Talk to a CPA as tax laws changes almost daily.. But then how much are you going to save by spending $1700 more..

 

[gte718p]

Not that anyone would get to upset about it, but tools would generally be considered capital v/s consumable. As a result you would have to depreciate them. That would work in your favor as yet another right off. However, it become incredibly complex.

If you want to do something complex a CPA is worth the couple of hundred dollars they cost. Our CPA saved us a ton when we were renting out my wife house.

 

[Chief919]

Its is wise to always save receipts to use for a deduction whenever possible.

It is almost always not wise to spend just for the sake of a deduction. Buy what you need, claim what you buy, don't ever spend just to be able to claim.

 

[Richard Cranium]

Why would you spend a dollar to save 30 cents.

 

[WickedMainer]

Personal opinion not tax advice as I don't have my cpa-if I made a lot, had investments, or have a lot of itemized deductions(at least 1000 more than standard deduction)a good cpa is worth it. You waste your money and give a cpa some very easy money for filling out an easy form and charging you a lot. Do easy filings yourself.

Why would you spend a dollar to save 30 cents? Its probably going to really only save 10-20 cents on the dollar. Most people's marginal rate is relatively low even if you do in fact make it into a higher tax bracket. use last years turbotax for a close estimate of what you will actually owe with a standard deduction.

You don't buy tools to save on taxes. You save on tool costs by writing off on taxes. This question should be worded are there any tools I need as it works out to buying them 10-20% off. Basically the government is encouraging you to buy more tools this way. why do you think they have a thing called bonus depreciation for new business vehicles and equipment? Answer is probably a combination of hand out to those industry manufacturers or economic stimulus . It's only one or the other if you are wicked biased politically. Either way it's not exactly a deduction with the taxpayer in mind.

 

[ToddW]

There's a lot more to it than just spend this, save x% that...

We have no clue how close you are to dropping tiers, etc...
That's where it REALLY comes into play

My opinion (not legal, not tax advice)
Pay a pro, we do and it's well worth it.
Not H&R Block or someone right out school either, someone that knows their way around!

 

[WickedMainer]

Agree with Todd about good cpa. I have seen some bad mistakes made at some chain tax preparation places. btw a tax preparer does not need a cpa, a cpa is needed for tax advise which is why I stated these are my opinions.

If you own a business, unless you are an exception, use a cpa for planning and tax prep.

I don't agree you need a cpa to ez file(ordinary income only, standard deduction and not itemized) It's straight forward and it's free filing with most software programs(if you have state income tax they make it up by charging huge $ for state add on) many people did there own by hand with little problems back in the day. Then again people could also balance a checkbook....

 

[WickedMainer]

Just ask a cpa for advise they generally charge hourly, honestly comparable to some of the hourly shop rates for garages and dealers so can't really bash the price too much.

if he says it's a basic filing you can still always file yourself

 

[stikman56]

Why would you spend a dollar to save 30 cents.

This,and you're not going to get to deduct it all anyway. Has to be the part that's over 2% I believe of your income. That is a losing battle.

 

[Hilltopmasonry]

Seriously invested the money in a IRA....it will pay off 10 times more in the future over a bunch of tools that you dont need


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[Askme42]

My brother and his wife hired a "professional" for a number of years, she was realtor so had many deductions that they too advantage of.

Then the professional mysteriously disappeared.

Went to 2nd professional who frantically said "WTF?? Holy ****!!, You can't do that!!!, Lets just hope we can get this straightened out voluntarily before they catch you........."

It cost them a LOT of money, our parents had to take their names off all the estate documents for a several years, but they finally did get it squared away.

Yep. I know a hair stylist that writes off everything. I mean every meal with the girls is a "business meeting". They are totally screwed if they ever get audited.

 

[Hilltopmasonry]

Yep. I know a hair stylist that writes off everything. I mean every meal with the girls is a "business meeting". They are totally screwed if they ever get audited.

You can write off whatever you want and you might get away with it as well but if you get audited that is a whole different story.

It is really is common sense, if you're claiming that you're earning $40,000 a year in your business however you're writing off $28,000 worth of expenses the math does not add up. There's not enough money for you to live on

A bricklayer that worked for me had a horse. The horse was for pleasure however he claimed it as a show horse. He wrote off all of the expenses for this Showhorse and he claimed a huge loss every year. Well the IRS audited him and after four years the agent asked him how much money have you earned from this horse in winnings.... please show me the receipts. Needless to say the horse was sold shortly after


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[Brian_WK]

Why would you spend a dollar to save 30 cents.

The reason to spend a dollar to save 30 cents is if you need the tools you get them for 30% off... other wise if in 3 months when you really need it your paying full price.
I know it doesn't actually work that way and with taxes it is more complicated, but if you want something, can afford it and can save money by buying it earlier rather then later why not?

Brian

 

[pcmeiners]

"I mean every meal with the girls is a "business meeting. They are totally screwed if they ever get audited."
Totally screwed means, the Feds deny the write off totally which they will, hits them with interest at 22% plus penalties, compounded. Would not be so bad except the Feds wait for three years or more to audit and then deliver the bill. Now the IRS will likely figure your cheating them, this gives them the ability to check back more then three years. Add to that a number of trips to IRS offices. Once audited, every year they will look for more; wait till you state decides to audit your returns.
Those lunch meals will become the most expensive meals they will ever have. It is OK to write off a reasonable amount of reasonable expenses, just not stupid ones.

 

[PelicanPines]

Always put money in retirement ... NEVER spend money on tools for a deduction ... PERIOD.

For the record... my wife was a Tax Auditor...

 

[gipraw]

If it is something you absolutely need in the next few months, it makes some sense to buy it early, but otherwise save the cash.