I have heard more than one photographer describe themselves as “accidental business owners.” They start with a passion for photography, then discover that people want to pay them, become sought-after in their location or niche, and voila, a business is born. Suddenly there is income to be deposited, expenses to be tracked, and taxes to be filed (and paid).
Whether you stumbled into being a business owner or you planned carefully and rolled out a formal business plan, there are certain business demands that take time and attention. Keeping good financial records is one of those essentials. It’s not fun, but it’s necessary.
Keeping records of your finances means that you need to track every dollar that comes in and out of your business.
It’s best practice to completely separate your business and personal money to do this. Hopefully you have already set up a separate business bank account and credit card. If not, that’s your first priority.
Once you’ve separated your business and personal money, you’ll need to have a consistent system to keep track of your business money.
As you are tracking the money coming in and out of your business, knowing which expenses qualify as deductions will help save money and keep you legit when it comes to tax time.
Here’s a breakdown of possible tax deductions for your photography business. As always, you should seek specific advice from your tax professional for your situation.
Marketing & Advertising
Website-related expenses
Client gifts (up to $25/client)
Education, coaching, and networking
Equipment and repairs
Studio rentals & location fees
Meals
Production costs (albums, prints, etc)
Contractors - i.e. second shooters, assistants, studio managers, etc.
Editing/Retouching
Bookkeeping and accounting
Legal fees
Subscriptions
Software costs
Merchant fees
Props
Possibly portions of your phone, rent, mortgage, and utility bills
Mileage
You’ll need to track these expenses in an organized manner so that the category totals are easily available to you when it comes time to file taxes. If you are just starting out, you may be able to do this with a spreadsheet. You’ll manually enter your income and expenses and sort by category to get your totals for the year.
If you plan to grow and scale, consider using software like Quickbooks Online, Freshbooks, or Zoho books. Instead of manual data entry, these allow you to connect your bank accounts for an automatic bank feed. At tax time, you’ll be able to run a Profit & Loss report that summarizes your total income and expenses.
When your busy season hits, it gets easy to put this important piece of your business on the back burner and let things like tax-deductible expenses slip through the cracks. But if you wait until the end of the year to catch up on your books, you will likely forget to include some of your transactions. Not to mention that dread of having it constantly hanging over your head.
You might consider hiring a bookkeeper to keep you organized. Or you might simply plan to set aside a few hours each month to stay on top of your finances. If your books are up-to-date throughout the year, you will feel so much relief and freedom. You’ll also be able to make strategic decisions about your business - like deciding if you can afford an equipment purchase, or a studio manager, or if you need to cut expenses. Without having a good picture of your tax-deductible expenses, it’s very difficult to plan and make decisions.
Whatever it looks like for you, make a plan today to organize your finances and stay current. Your business (and accountant) will thank you.
Tanya is the owner and founder of Tidy Books, a bookkeeping firm dedicated to helping photographers succeed with money. Find financial resources and support for your business here.