It was a sad day in August when I dropped my Macbook Air on the ground. It wasn't completely destroyed but it has been limping along ever since and has required daily doses of TLC. My frugal (cheap) side wanted to wait as long as I could to replace it, but after considering that 1) it was a smart budget decision, 2) it has been hindering my production and a frozen Zoom call almost cost me a client and 3) it would be a tax deduction for this year…I bought a shiny new Macbook Pro on Black Friday.
Why do I tell you this story? Because too often I talk with business owners (and I have been guilty as well) who make shot-in-the-dark, emotional purchases at the end of the year and don't realize the strategy behind year end purchases. Let's take a look at how to make smart, proactive decisions that lead to an amazing and profitable year-end.
Where to spend your money
Below is a list of common deductions for photographers to consider. This is not a comprehensive list, nor is it necessary to spend in ANY of these categories. But if you've been considering a purchase in any of these areas this year, consider doing it before December ends.
Education (think courses, programs, masterminds, even coaching)
Software - (CRMs, photo editing, organizing, client management, etc.)
Photo Gear (who doesn’t love a new lens?)
Computers, printers, office equipment
Home office improvements (ergodynamic chair? Your back will thank you)
Accounting services (our personal favorite - we want you can sleep at night!)
Client gifts ($25 per client is deductible)
How to be smart about spending your money
Consider these questions before your next purchase.
Is this financially responsible? I think in most businesses you there will be transition years where it's necessary to make some big investment purchases. These are long-term moves that will ultimately move your business forward. 2023 was that year for Tidy Books. We had several large investment expenses that coincided and pushed our profitability than we like. We had to say no to some other expenses that weren't absolutely necessary. So before you say yes to a purchase, consider: do I have margin in my budget for this expense or will it put a strain on my finances.
Will this benefit my business? I think photographers have a special place for shiny new objects, aka if I just purchase this new lens or that new course, I will have arrived. This is a myth - consider working with the knowledge or equipment you have until you have applied what you already know. When you start to feel limited, allow yourself to make some investments. Sometimes you have to go with your instincts and be okay with the risk of a purchase that you have a feeling will improve you business. Just do your research and consider the benefits of the purchase first.
Is this an expense I have been considering anyway? If the answer is yes, then it's typically a tax advantage to go ahead and purchase it this year and get the tax deduction. It's a good idea to check with your accountant first. Now, if a great deal pops up, this is not to say you cannot make an unplanned purchase. Just run it by the above questions before purchasing.
Why spend your money
In business 101 you learn that a tax deduction reduces your taxable business income. I will give you a very simplified example. Let's say I am a sole proprietor and my bottom line (taxable income) was $50,000. If I buy $5,000 worth of computers and equipment and spend $1,000 on a new course, I will now be taxed only on the $44,000. This is the IRS' way of encouraging spending for small businesses. So don't be afraid to spend your money - but please be smart about it.
One year I impulsively invested into an expensive program that ended up not delivering on its promise. It was a disappointment, but it wasn’t a strain financially. I had a margin built up that allowed for the purchase, I took a risk that didn't work out, and in the end it was a tax deduction anyway.
I never recommend making purchases based on whether it will be a tax deduction. But if it's a choice of when not if, I will typically make the purchase in the current year. The key is to make smart, proactive decisions and you will be in great shape!
