Tools...technicians...taxes

[Chipmunk]

I was talking to a friend of mine yesterday who works as a technician (mechanic) at a Cadillac Dealership and he was complaining about the cost of the tools and toolbox he has to buy to stay employed.

He said he has well over twenty five thousand dollars invested in a Snap-On tool Box, Snap-On Tools and Specialty tools for his trade, mostly purchased on credit.

I said surely you are deducting them on your taxes. He looked at me like a deer caught in headlights. Apparently he wasn’t, so I clued him in.

Along with his home mortgage, his tools and his pick-up which he uses to make some service calls, plus work uniform and safety boots he may get every dime back this year. (his pick-up is depreciated over a period of years based on the percentage he uses it for work)

I wonder how many other similarly situated people there are out there who needlessly take an unnecessary beating on taxes every year. I understand everyone’s situation may be different and some may nitpick my interpretation of tax law….but it’s worth considering.

 

[ptschram]

I have deducted more than $140K in perishable tooling over the past ten years.

Last year was the first year in at least 15 that I had to pay taxes and I wouldn't have then if I'd been paying attention.

My wife complained about our rental house but from a tax avoidance perspective, it was hard to beat.

(that said, I have had some pretty horrible problems with the IRS and have learned to not believe everything my accountant says and to choose my accountant VERY carefully)

 

[Seanbev24]

I wrote off about $5k for tools last year, probably $6-7k this year

 

[packofqtips]

i write off tools and union dues every year

 

[Deafautotech]

I was talking to a friend of mine yesterday who works as a technician (mechanic) at a Cadillac Dealership and he was complaining about the cost of the tools and toolbox he has to buy to stay employed.

He said he has well over twenty five thousand dollars invested in a Snap-On tool Box, Snap-On Tools and Specialty tools for his trade, mostly purchased on credit.

is the dealership must have a snap on toolbox, tools, and etc in shop? or tech prefer a snap on??

my work do must have a tech to provide the tools to work there. but it dont have to be snap on or mac or matco... they dont give a **** on what is tools the techs use... i knew few techs who use harbor freights to use it for work on vehicles... but for me i has choice on what like to buy and use. sometime i had tired of break cheap one(i learned the lesson from my father at home garage...)

i still do write off on taxes that i had to paid the stuffs that i need for my work...

 

[diesel research]

Along with his home mortgage, his tools and his pick-up which he uses to make some service calls, plus work uniform and safety boots he may get every dime back this year.

Is that even possible? I mean sure, you could negotiate a refund of some sort, but I have never personally saw a way to actually get a refund back as big as the amount paid in. While refunds vary in size, it seems IRS always finds a way to keep atleast $1000.

 

[ptschram]

Is that even possible? I mean sure, you could negotiate a refund of some sort, but I have never personally saw a way to actually get a refund back as big as the amount paid in. While refunds vary in size, it seems IRS always finds a way to keep atleast $1000.

Lots of folks get back MORE than is withheld form their pay. EITC for one.

If you have more deductions than what you had withheld, you get all of your withheld wages back. Itemizing is almost always necessary to be able to do this, though.

2011 was the first year I even had to make estimated quarterly payments and after the first quarter, I could justify not even making those.

 

[diesel research]

Lots of folks get back MORE than is withheld form their pay. EITC for one.

I am sure it is easier married with children, but I have never found a way to make the adjusted income meet the $13k requirement in order to qualify for such a thing.

 

[SpiderGearsMan]

my dad told me to just take the standard deduction ..not owning real estate , itemizing would not get me as a good a refund
I don't think he thought the irs would believe a young kid spent 70 % of his pay on tools

 

[ptschram]

I am sure it is easier married with children, but I have never found a way to make the adjusted income meet the $13k requirement in order to qualify for such a thing.

I run my shop as a sole proprietorship. My shop is at my home. It makes things much easier.

We may try some mechanisms that will allow the shop to pay rent to the household which may increase the expenses of the business. I'm still investigating if we can structure things so that this will result in a benefit and not just more complicated accounting and merely shifting an expense from one side of the balance sheet to the other side as income.

 

[SpiderGearsMan]

I run my shop as a sole proprietorship. My shop is at my home. It makes things much easier.

We may try some mechanisms that will allow the shop to pay rent to the household which may increase the expenses of the business. I'm still investigating if we can structure things so that this will result in a benefit and not just more complicated accounting and merely shifting an expense from one side of the balance sheet to the other side as income.

ahh the old home office scam .....lol

 

[Chipmunk]

To “packofqtips” union dues are no longer deductible, but I did the same thing. I figure if they catch me…what are they going to do…make me pay what I should have paid anyway? (at last the first time)

To Deafautotech, my friend can buy any kind of tool he wishes, he just prefers Snap-On.

Remember, it’s not just tools but steel toed boots, uniforms, as long as they are not suitable for everyday civilian wear, uniform cleaning, schools and courses that advance your career. Be creative, just because you turn wrenches for a living doesn’t mean you need to take a back seat to the fat cats on Wall street. ( I know an attorney who deducts having his shoes polished in the lobby of his building. His theory is no one hires an attorney with scruffy tennis shoes, and he’s still walking around free)

 

[SpiderGearsMan]

you should buy tools then lease them to yourself ..

 

[SpiderGearsMan]

Is that even possible? I mean sure, you could negotiate a refund of some sort, but I have never personally saw a way to actually get a refund back as big as the amount paid in. While refunds vary in size, it seems IRS always finds a way to keep atleast $1000.

rich people don't pay their taxes until the very end , then negotiate with the irs to pay pennies on the dollar of taxes owed

 

[truckdriver]

Is that even possible? I mean sure, you could negotiate a refund of some sort, but I have never personally saw a way to actually get a refund back as big as the amount paid in. While refunds vary in size, it seems IRS always finds a way to keep atleast $1000.

No, you only get to reduce your taxable income by that amount. If your taxable income was 50k and you spend 5k on tools etc, your taxable income is now 45k. If your tax rate is 25% then you got $1250 back. It is amazing how many people get this wrong, especially the self employed who it affects the most.

 

[Honda guy]

Along with his home mortgage, his tools and his pick-up which he uses to make some service calls, plus work uniform and safety boots he may get every dime back this year.

Please explain. Are you saying that he could get back every dime that he spent on tools, etc., or are you saying that he would not be taxed on the money spent on tools, etc, and the IRS would refund the tax that he payed in.

If you're saying that he could get back all the money spent on tools, etc. How is this possible?

 

[diesel research]

No, you only get to reduce your taxable income by that amount. If your taxable income was 50k and you spend 5k on tools etc, your taxable income is now 45k. If your tax rate is 25% then you got $1250 back. It is amazing how many people get this wrong, especially the self employed who it affects the most.

This was always my assumption of "the way it works", yet all the time we have people claiming to "get back more than they paid in" or essentially having the government pay them additionally to go to work.

Then so many others extending themselves on education and tools claiming the government is somehow going to pay for the total cost.

I know how reducing your liabilities works, but that is different than these people claiming "I paid in $5000 and got $10,000 back" It might be somehow possible (doubt it) but if it is, I want in on it.

 

[Chipmunk]

Please explain. Are you saying that he could get back every dime that he spent on tools, etc., or are you saying that he would not be taxed on the money spent on tools, etc, and the IRS would refund the tax that he payed in.

If you're saying that he could get back all the money spent on tools, etc. How is this possible?

I'm saying that he may get back every dime he paid in taxes.

 

[cundifc]

rich people don't pay their taxes until the very end , then negotiate with the irs to pay pennies on the dollar of taxes owed

How do rich people negotiate the tax code with the IRS?

 

[jethro29]

i claim on average about $7000.00 a year in tools and equipment and about 5-5 hundred in boots and work wear.

 

[Farmrod]

Guy that works in our shop as the trash man makes roughly 14,000 a year out of every check he pays in 200-250 depending on overtime, he has a child and a wife who stay home he's on food stamps and every year at tax time he comes in with his $6,000 tax check pisses me off but is proof you can get back more than you pay in

 

[ptschram]

How do rich people negotiate the tax code with the IRS?

Lobbyists bought and paid for withe their riches.

How do you think we got into the situation we're in right now?

 

[ptschram]

ahh the old home office scam .....lol

My home is 2600 sq ft, approximately 250 sq ft of which is used for my office and shipping/receiving.

My shop is 3100 sq ft. The pen occupies another 2000 sq ft, and the graveled portion of the yard that is not directly in line with the attached garage adds another few thousand sq ft.

Sadly, I can not deduct more than half of the mortgage expense as a business expense, even though more of the property is used for business than residence.

But, all of our lawn care, snow removal, trash service, etc is deductible, but until I have a meter put in for the shop, I cannot expense any of the electricity.

I've been busted by the IRS for things I didn't even know I was doing, much less that they were wrong (reference my comment about picking one's accountant). I am pretty damn careful these days to not run afoul of the IRS.

I've also used the innocent spouse claim when my ex-wife gave me a Socialist Slavery number to use for her that the IRS informed had never been assigned!

 

[SpiderGearsMan]

my dad is a tax accountant , he is an expert on getting home office through

 

[diesel research]

Guy that works in our shop as the trash man makes roughly 14,000 a year out of every check he pays in 200-250 depending on overtime, he has a child and a wife who stay home he's on food stamps and every year at tax time he comes in with his $6,000 tax check pisses me off but is proof you can get back more than you pay in

The math doesn't add up. He is using some smoke and mirrors trickery on you guys.

If he is paid weekly, $200-$250 is more than double what he gets back, and only about $1k less than his annual gross.

So obviously he gets paid biweekly. 26 by-weeks in a years, his $250x26 periods is more than his refund check.

Also, $200-$250 every 2weeks is pretty much 50% of his measly paycheck. Could you imagine that? I am not sure if the current brackets even go that high. I wouldn't know because I will never be upper-middle tier.

As you can see, he is poor, and gets most of his pennies back, but that does not add up to more than you put in. No need to feel pissed off

 

[jimindm]

I have claimed all of the items mentioned for years. The way I understand it is. You can never get back more than you pay in. What you claim reduces the amount of taxable income you pay taxes on based on that figure.

When I was single and living at home, it just was not worth it to file long form for the deductions. It was a wash. Once I was married, had a home that changed. Add on a few children and it changes more. Filing taxes jointly with a spouse, he may get back more than he paid, but most likley not as much as they paid in together.

As far as a huge refund check goes, that is not as hard as you think. You can have the deductions taken out for being single, when time to file taxes, claim wife and children. Most accountants see this as a waste and the government is useing your money all year, before giving it back. They are right you pay more in on the check, but most people can not or do not have the ability to put a small amount away every pay period. When tax time rolls around they have a savings built up to get a large refund because they have paid in more than they should have through out the year.

I have worked out of my garage for a number of years. It really depends how your business is set up. Buying something personelly and leasing it to the business, usually is not worth the hassle for me. You are better off at looking for other items the business can pay for. Cell phones, home phone lines, part of the utilities, a business vehicles. Clothes or uniforms that are worn and laundered by yourself or you pay to have done. Pay your wife to do your accounting, pay the kids to mow or plow snow.

The big ticket items are the hardest for me to write off. Not if I can write them off it is how. Buy an AC machine, or brake lathe, a snow blade for the truck, or snow blower, things like this go into a depreciation table that is wrote off over a few years. Try to explain to your accountant that you can not write off a piece off electronic equipment that way. A scan tool that costs thousands to buy, and hundreds to be kept up to date, simply can not be on a deprecition scale. It has to go on the yearly log.

I work on my accountants vehicles and plow his snow, he pays me for what I know and how I do it. I also pay him for what he knows and how he does it. I do not know the tax code, but he knows the limits of his mechanical ability also.

 

[Pedro86]

well, this year I expect to get a full refund- even if i dont deduct my tools, given the fact that Ive only been at my job for 6-7 months for the 2011 tax season and was unemployed for the first part of 2011.. (i.e under poverty level for last year)..

im still gonna deduct tools, but im not sure if it will really do me any good since by all accounts im getting a full refund this year.

 

[srmofo]

I run my shop as a sole proprietorship. My shop is at my home. It makes things much easier.

We may try some mechanisms that will allow the shop to pay rent to the household which may increase the expenses of the business. I'm still investigating if we can structure things so that this will result in a benefit and not just more complicated accounting and merely shifting an expense from one side of the balance sheet to the other side as income.

Whomever is collecting that "rent" will have to pay taxes on it as income. Which can be beneficial IF you're shop is on the borderline of being knocked into the next higher tax bracket. You basically are shifting tax burden from your "shop" onto yourself if you are collecting the "rent". However that can work backwards and knock your personal income into a higher tax bracket.

 

[diesel research]

Whomever is collecting that "rent" will have to pay taxes on it as income. Which can be beneficial IF you're shop is on the borderline of being knocked into the next higher tax bracket. You basically are shifting tax burden from your "shop" onto yourself if you are collecting the "rent". However that can work backwards and knock your personal income into a higher tax bracket.

What if the property is owned by a 3rd "real estate corporation"?

 

[demographic]

No, you only get to reduce your taxable income by that amount. If your taxable income was 50k and you spend 5k on tools etc, your taxable income is now 45k. If your tax rate is 25% then you got $1250 back. It is amazing how many people get this wrong, especially the self employed who it affects the most.

That's how it works over here but I still see people saying they get everything they spend back because its 100% deductible...

 

[ptschram]

I have claimed all of the items mentioned for years. The way I understand it is. You can never get back more than you pay in.

You are better off at looking for other items the business can pay for. Cell phones, home phone lines, part of the utilities, a business vehicles. Clothes or uniforms that are worn and laundered by yourself or you pay to have done. Pay your wife to do your accounting, pay the kids to mow or plow snow.

Earned income tax credit allows some folks to get back more than they pay in. I had a girlfriend for whom I helped with her taxes. With her kid, mortgage, etc, and fairly low pay, she fell into a category where EITC applied and she got back slightly more than was withheld-IIRC.

In my case,my wife's vehicle is lettered with company name, she deducts 50% of her mileage. Our cell phones are paid for by the company as well.

We have 2.5 acres, the time spent to mow would be better spent turning wrenches.

My vehicles are provided with license, insurance and fuel through the company.

Whomever is collecting that "rent" will have to pay taxes on it as income.

What if the property is owned by a 3rd "real estate corporation"?

This is what we're trying to figure out-if it's beneficial or not.

 

[ChvyC10]

Didn't even think about this... Might just be able to get a few buck more back.

Thanks.

 

[Hootbro]

Lobbyists bought and paid for withe their riches.

How do you think we got into the situation we're in right now?

Is this the Democratic Underground or a tool web sight?

 

[MattT]

Then so many others extending themselves on education and tools claiming the government is somehow going to pay for the total cost.

Tools and education and home loans might swing things to the point folks get more than they paid in but it'll never cover what they spent. If someone says their 6K "refund" paid for the 6K they spent on tools what they really mean is they were gonna get 4 or 5K back anyways and claiming the tools got 'em an extra 1 else 2K.

What typically gets people back more than they paid in is the damn (un)earned income credit

Not sure what would happen if you have a year where deductible expenses were higher than your income. That might get back more than you paid in too?

 

[Chipmunk]

Is this the Democratic Underground or a tool web sight?

What if it's a Tool of the Democratic Underground which puts the Screws to the Tax Man?

 

[Farmrod]

The math doesn't add up. He is using some smoke and mirrors trickery on you guys.

If he is paid weekly, $200-$250 is more than double what he gets back, and only about $1k less than his annual gross.

So obviously he gets paid biweekly. 26 by-weeks in a years, his $250x26 periods is more than his refund check.

Also, $200-$250 every 2weeks is pretty much 50% of his measly paycheck. Could you imagine that? I am not sure if the current brackets even go that high. I wouldn't know because I will never be upper-middle tier.

As you can see, he is poor, and gets most of his pennies back, but that does not add up to more than you put in. No need to feel pissed off

We get paid monthly...no smoke and mirrors I work for a school that has to put everyones pay on the internet site and every year he brings in his tax check to rub it in

 

[Chipmunk]

We get paid monthly...no smoke and mirrors I work for a school that has to put everyones pay on the internet site and every year he brings in his tax check to rub it in

EITC, the Earned Income Tax Credit, sometimes called EIC is a tax credit to help you keep more of what you earned. refundable federal income tax credit for low to moderate income working individuals and families. Congress originally approved the tax credit legislation in 1975 in part to offset the burden of social security taxes and to provide an incentive to work. When EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit.
To qualify, you must meet certain requirements and file a tax return, even if you do not owe any tax or are not required to file.

 

[Tim-Bob]

Here in Canada, we mechanics can make tool deductions up to $500. In order to claim that amount, you have to spend considerably more, based on a percentage of income.. Then, if you sell the tool, you have to claim what you got as income. Apprentices can claim more than journeymen. We have only been able to claim this deduction for a few years now. In the end, we end up paying about 30% in income tax. But we have free healthcare that we can wait months to get appointments for!!!

 

[Boiler]

Deduct my tools, part of my computer equipment, printer ink, paper, labels, etc, packing material, part of my utilities, milage, etc. last year got a fat refund. This year I had more income and less expense. I'll be damn happy if I dont owe. My wife and her former boss do my taxes (she used to prepare taxes with him). But I still am scared that they'll do something wrong and I'll take the rap...

 

[Charles (in GA)]

The "tools of the trade" deduction is those deductable expenses that EXCEED 2% of the Adjusted Gross Income generally. It falls under the Job Expenses and IRS Publication 529 discusses this.

Tools Used in Your Work are traveling:
Generally, you can deduct amounts you spend for tools used in your work if the tools wear out and are thrown away within 1 year from the date of purchase. You can depreciate the cost of tools that have a useful life substantially beyond
the tax year. For more information about depreciation, see Publication 946.

Charles