Aquariums and taxes...

[Picesduh]

Is a “humidifier” in the office a business expense because I got a pretty big and expensive one [emoji6]

 

[mrpizzaface]

A rich cat can buy a Van Gogh painting for 50 million and write that off as a business expense and yet some guy with a small business who wants a tank to view to keep himself sane while working is creating a tax liability...... gotta love the world we live in.

I don’t think you can write off fine art.

 

[Picesduh]

Per IRS regulations IRC 162(a), the expenses must be ordinary and necessary in your trade to be deductible. As was already said by someone else

 

[Instigate]

The general rule is that if you have not turned a profit in at least three of the prior five years, the IRS will categorize your business as a hobby. This does not mean that the IRS could not classify your "business" as a hobby before then (see criteria listed earlier I posted). It also does not mean you can not have losses more than 3 years in a row (many corporations do for example, but they obviously can easily show they are engaging with the intent of trying to make a profit)

The deductibility of expenses obviously depends on the classification. If your "business" gets classified as a hobby, then you are only allowed to deduct expenses up to any income you show. In other words, you can't show a net loss for a hobby. Also, hobby losses do not carry forward to other tax years (unlike corporate business losses). If you're a bona fide business, then you can show all legitimate losses. For most self employed individuals, business income / loss is broken dowon on schedule C and the net income or loss is reported on your 1040 (line 12 for 2017 1040 form). The income or loss simply adds to or decreases your total income from all income sources showing on your tax form (such as pensions, W-2 wages, rent, interest, dividends, alimony, interest, etc...).

Startup costs for a new business....I'm not sure what the rules are for this since the new tax law passed. It used to be you could deduct $5,000 of startup costs and $5,000 of startup organizational costs (assumes startup and organizational costs are less than $50,000). Many purchases for an aquarium "business" such as equipment would be assets that would need to be depreciated over time and could not be immediately expensed (however, there are rules to allow for immediate expensing or bonus depreciation that I'm not getting into in this (you can reference 26 U.S.C. § 179 or just google Section 179 deductions)

Thanks for all the info!

 

[John3]

I don’t think you can write off fine art.

You would be surprised with what is going on with fine art and taxes. There are art “museums” setup as charities that are basically just some rich guys personal collection of art. They might allow the public in a couple times a year to make it fly. There’s all kinds of crazy tax stuff when it come to fine art. It’s the main driver behind these record art auctions. Just google it.....

 

[Daniel Waters]

Is a “humidifier” in the office a business expense because I got a pretty big and expensive one [emoji6]

A humidifier could be justified to be a legitimate business expense. The reduction or maintenance of a relative humidity level could serve a very valid maintenance reason for the building or overall health of employees. Once again, though, this would mostly likely be considered a capital asset and should be depreciated over the useful life of the product (or expensed immediately under Section 179 if applicable). The IRS specifically mentions CENTRAL humidifiers (hardwired into the heat / air unit) as improvements to heat / air that can be considered improvements that can be capitalized (and subsequently depreciated). A portable humidifier is probably one of those grey areas that I think you could still justify as serving a legitimate business purpose.

Of course, you may actually be calling your aquarium a humidifier and I'm taking your question too literally !

 

[MIchael10101]

Daniel, thank you so much for your advice. Tax laws are dumb, but hey what government regulatory program isn't?

 

[Daniel Waters]

Daniel, thank you so much for your advice. Tax laws are dumb, but hey what government regulatory program isn't?

You're welcome, but I make no warranty and am not allowed to provide "tax advice" per my employer so you should consult your own tax professional. However, I do advise that you install the aquarium anyway and do a build thread to help feed all the other reef members aquarium habit!

 

[mrpizzaface]

You would be surprised with what is going on with fine art and taxes. There are art “museums” setup as charities that are basically just some rich guys personal collection of art. They might allow the public in a couple times a year to make it fly. There’s all kinds of crazy tax stuff when it come to fine art. It’s the main driver behind these record art auctions. Just google it.....

I did look it up. Mind blown.

 

[Nathan Peel]

I am a freelance writer for the aquarium industry. I currently write for AlgaeBarn. I feel that in order to do my work, which is very profitable, I require a reef aquarium. I feel that without a proper reef tank, I can not write great content and keep up with the hobby. So unlike others who are using their tank as office decoration, my tank is for research purposes. How can I write about corals and fish without keeping them? Obviously, it is possible, but I think to be respected in the industry, you need a tank. I also plan on using it to attract clients via videos and pictures on my website. Does this seem like a reasonable business expense?

Also, I used the aquarium to test products that I need to write about. My client has specifically asked me to test products out. I don't know how I could do this without a reef tank. I feel like this should certainly count as a business expense. I had a 20-gallon tank for a year and upgraded to a 60-cube specifically for all of these reasons.