Work, woodworking projects, taxes?

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This is kind of a complicated question, and unique to me in some ways as I am a Machinist by trade, do woodworking as a hobby, and often make projects that help me stay organized at work.

Now we all know that any personal tools you purchase so you can do your chosen craft better,and is not covered by a work purchase program, can be deducted off your taxes come April 14th. So my question is, since I often build wooden toolboxes, and other wooden items like sand paper holders, pigeon holes and cabinets, can I deduct these off my income taxes as well? Its really no different then going out and buying say a Snap On Toolbox for $500 bucks or something?

Now assuming I can do this, what is deducted...just the cost of the materials such as wood and hardware, or can I deduct the what the toolbox is worth as if I was to sell it to some guy in the newspaper or something? Its kind of gray because what I spent to build it, might be actually quite low compared to its worth, but my time has got to be worth something?

Just curious?
 
Talk to a tax professional. All you can get here are opinions. ;) Shoot, even when you call the IRS, all you get is an opinion, and they are not bound by their own opinions. :eek:

A tax professional is one who can defend their position in a tax court.

I rather doubt your labor is deductible though. An item made for charity might be a parallel. There you can only deduct materials.
 
I agree, a tax accountant would be the one to ask about that.

I play it safe with the IRS. I made and donated several pieces of altar furniture to my Church last year. While I might have been able to deduct the market value for the items, I deducted only the cost of materials, and even then did not include stuff like glue and sandpaper and such. BTW, beginning with last year's returns you need to have receipts for all such donations.
 
I am not going to purport to be a tax genius, that is what my tax accountant/lawyer is for. In the past she has been able to reduce my taxable income utilizing some formulas for time vs material. I would very strongly advise you seek counsel on this one. It may save you a bundle.
 
I agree that the opinions posted here are often slanted and are best left to the pros. But in my humble opinion (having just finished my taxes and contributed to the illegal alien fund with an additional check) Unless that cabinet/tool box or whatever you made is used in a BUSINESS in which you use to make REPORTED gains or losses, it cannot be claimed. Remember, should you decide to "Make a Business" to report gains and losses, you have to set up an account and pay top nd taxes from the profits and Social Security on every dollar you earn even if it is a loss. Are you ready to do that?
 
Talk to a pro if you want, but I don't think its not going anywhere. Even if you can make such a deduction, once you start itemizing, you find out what an incredibly good deal the standard deduction is. I've only ever itemized when I had mortage interest or huge amounts of un-reimbursed mileage in a temporary job. All other times I did the paper work, i found I could accumulate about a fifth of the standard and just left it at that. Now if you do have a mortage for example, it might be worth it.
 
I have NO idea what the tax rules are NOW, (that's what I pay the accountant for):D, but several yrs back, I had a situation "Similar" to your's, Travis, and my accountant at the time told me that;
I could write off the cost of the materials used without a problem, But....if I wanted to write off more than that, (such as value added for my time, that it was a NO WIN situation, because I would have to show that money as INCOME and be taxed on that. The write off for the use of the shop tools required too much paperwork for it to be worth while to me to fool with so I didn't do it.

NOTE: I have no idea if the above mentioned information would apply the same with the current tax rules or not, Soooooooo........ as the others have stated, See a Tax Accountant, (and a GOOD one at that).
 
Its interesting because I do have a legitimate business...its called TJ Forest Products and something I started quite awhile ago when I was logging full time. The problem is, a logging contracting business is super simple since there is no sales tax involved, or anything like that. Its a simple, this is what I got paid for the wood,and this is what it cost me to take it from stump to truck. This is why my Firewood 2008 venture is all on the up and up.

I have thought about twisting the direction around a bit to include the ability to charge sales tax and whatnot for wooden products that I make. The problem is the name really does not fit. Its okay for logging services but for woodworking and toolmaking, its a bit confusing.

I have thought some about changing the name to TJ Forest and Tool, but I am not sure what that requires paperwork wise. Its a new name so I assume you would need to do a whole new DBA and all that. It might just be easier to keep the name I got, even if it is not that great.:dunno:

The one thing I do have going for me is a best friend who is an attorney. He told me once he would do all the legal work for a woodworking business if I ever needed it. He likes my woodworking, and his wife is always after me to pursue it more on a full-time level. Its tempting, but I like building boats and tools and having the steady paycheck. The few years I worked for myself were pretty lean years.
 
I do have a legitimate business...its called TJ Forest Products....... The problem is the name really does not fit. Its okay for logging services but for woodworking and toolmaking, its a bit confusing.

Well for the woodworking part I think it would fit.
You make wood furniture from wood don't you?
Wood comes from a tree and the tree comes from the forest.
 
Talk to a tax professional. All you can get here are opinions. ;) Shoot, even when you call the IRS, all you get is an opinion, and they are not bound by their own opinions. :eek:

A tax professional is one who can defend their position in a tax court.

I rather doubt your labor is deductible though. An item made for charity might be a parallel. There you can only deduct materials.

Carol, I have to doubt that. A finished product has considerable more value than the raw materials. e.g. a work of art is fully deductible for it's value as art.
 
Unless the tax laws have changed in that area from the '90's, labor is not deductible for charitable items. Like I said, see a tax professional.

That was my personal experience. That's all I can tell you. :)
 
Well all I have to say Travis...to bad you don't live in Canada. Here, unless you are a SMALL public company trading on the Toronto stock exchange if they catch up to you all you do is throw your arms up in the air and say "you are kidding me, I didn't know that". The Big companies do whatever they want...lol. The proper advice as mentioned is see your accountant. Good Luck! Kidding...I lean to the right.:rofl: Or is it left? :):rofl:
 
I am with the group that says you can deduct the materials, but not the labor (but I am not an accountant). Deducting a portion of your home for business use has become an invitation for an IRS audit, so I don't know anyone who does that any more.

In general you don't need to have a DBA to make and sell things... the name your mother gave you is a sufficient business name, and saves a lot of legal hassle. Report both income and expenses on 1040 Schedule C. You have to pay income and social security taxes on the profits, not on the gross sales. If you try to make a profit, and do make a profit at least some of the time, you are considered a business, and can carry losses forward to offset profits in future years, but if you dont try to make a profit, it is considered a hobby and deductions are limited. I have started a web site to help folks with part-time or retirement or one-person craft businesses - see www.solowoodworker.com
 
That does look like a very good website. I did not have time to read it all...I am about to head to work, but I bookmarked it and will read it later.

I gotta do something. The IRS agent I talked with just asked me one question. "How much money did you make last year?" So I told him. He then said "Well write out a check and send it to us."
 
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