Tax Deduction

[Vincent]

Jurisdiction

Illinois

Hello,

I didn't see a "Tax" section, so sorry if this in the wrong section.

I am married and file jointly.

My wife has a W-2 job and does Door Dash a little bit through the year.

I do freelance I.T work and file a 1099-K or 1099-Nec depending on which companies I do business with.

My question is, when I buy tools during the year, I keep my receipt but I don't remember ever trying to deduct them from my taxes.

So this year I would like to deduct them if possible, because I have had to buy some expensive tools to get my jobs done. (networking tools, drills, ect)

Do I have to itemize my taxes to take a deduction for tools bought or can my wife and I take the standard deduction and still deduct these tools I had to buy?

Again have never tried to deduct tools from my taxes before , so sorry for the newbie questions..

I have deducted mileage and that is pretty straightforward.

I know I will get this year's IRS mileage amount X the business miles I have drove.

Do you get a dollar for dollar amount deduction for tools?

So for example, if my earnings are $50,000 and my tools cost $3000, would be down to $47,000 before any other deductions such as mileage and so forth?


Last question, or I lose or someone steals my tools at any part of next year ( unfortunately this happens) do I have to file a loss on the following years taxes or do anything else tax related?

I don't see selling any tools because I need them. I am more concerned about some one walking off with them and having to pay any money in taxes later.


Thanks in advance for any advice!

 

[adjusterjack]

I didn't see a "Tax" section, so sorry if this in the wrong section.

There is. I moved your post to Taxation. No worries. We all read all the forums and there is a tax attorney here who is likely to come by later. @Tax Counsel

 

[adjusterjack]

My wife has a W-2 job and does Door Dash a little bit through the year.

I hope she has the proper car liability insurance.

Do I have to itemize my taxes to take a deduction for tools bought

Study up on Schedule C for business taxes.

2023 Instructions for Schedule C (2023) | Internal Revenue Service

www.irs.gov

The IRS website has other business related publications like self-employment tax, depreciation, estimated tax, etc.

my tools cost $3000

If you were eligible for a casualty loss it would make a difference in your taxes of only a few hundred dollars.

Business use of tools and equipment is limited to a few hundred dollars on your homeowner's policy (read it, you'll find it).

You would be wise to insure your tools and equipment separately for their replacement value. Talk to your insurance agent.

 

[Vincent]

There is. I moved your post to Taxation. No worries. We all read all the forums and there is a tax attorney here who is likely to come by later. @Tax Counsel

Thank you!

 

[Tax Counsel]

Do I have to itemize my taxes to take a deduction for tools bought or can my wife and I take the standard deduction and still deduct these tools I had to buy?

You are self employed, and so is your wife with regards to her Door Dash gig. That's taxable income for you and her and that is reported on your federal income tax return (Form 1040) using Schedule C. You each would complete a Schedule C and Schdule SE (discussed below) for your separate businesses. You may need other forms or schedules to include with your return, like Form 4562 to deduct or depreciate property you buy for the business that will have a useful life of more than one year.

Note that self employed persons also pay self-employment (SE) tax. This is not part of your income tax, but is instead the way that self-employed persons pay their FICA (Social Security, Medicare, and Medicaid) taxes. That's done using Schedule SE. It's included with the Form 1040 for convienence for both the IRS and taxpayers. The IRS sends the Schedule SE data to SSA to add to your Social Security earnings record, which is used to determine the amount of your Social Security benefits. You do, however, get a deduction of one half of the SE tax against your income on your income tax return.

Do you get a dollar for dollar amount deduction for tools?

If your tools are used 100% for business then you may deduct the full cost of them by electing to take the section 179 deduction for them rather than depreciating them. IRS Publication 946 explains all the rules for that deduction in chapter 2. You are limited, however, by the amount of the income from the business. Any amount of the deduction you don't get to use this year is carried over to next year.

Last question, or I lose or someone steals my tools at any part of next year ( unfortunately this happens) do I have to file a loss on the following years taxes or do anything else tax related?

That is casualty a loss. A summary of the rules for that are in IRS Tax Topic 515.

The IRS has a comprehensive explanation of the tax treatment of self-employed income in Publication 334. That's a good place to start when you have questions about business income tax issues.

Note that all the forms and publications I linked are for the 2023 tax year. They are still useful, however, for an understanding of how this works. There have no significant changes to these rules for 2024 (at least so far). The IRS typically has the new forms and publications up starting in late November and continuing through December.

You might want to consider having a tax pro (i.e. enrolled agent, CPA, or tax attorney) prepare your 2024 return at least for this year so you'll be able to see how to report everything properly. A lot of tax attorneys don't prepare income tax returns and if they did, the fee would be more than the enrolled agent or CPA. (I'm a tax attorney myself and the only income tax returns I do are my own.) Note that the 2017 tax act expires at the end of 2025, so there might be some major changes for 2026 depending on Congress decides to do next year about the sunset.

 

[Vincent]

You are self employed, and so is your wife with regards to her Door Dash gig. That's taxable income for you and her and that is reported on your federal income tax return (Form 1040) using Schedule C. You each would complete a Schedule C and Schdule SE (discussed below) for your separate businesses. You may need other forms or schedules to include with your return, like Form 4562 to deduct or depreciate property you buy for the business that will have a useful life of more than one year.

Note that self employed persons also pay self-employment (SE) tax. This is not part of your income tax, but is instead the way that self-employed persons pay their FICA (Social Security, Medicare, and Medicaid) taxes. That's done using Schedule SE. It's included with the Form 1040 for convienence for both the IRS and taxpayers. The IRS sends the Schedule SE data to SSA to add to your Social Security earnings record, which is used to determine the amount of your Social Security benefits. You do, however, get a deduction of one half of the SE tax against your income on your income tax return.


If your tools are used 100% for business then you may deduct the full cost of them by electing to take the section 179 deduction for them rather than depreciating them. IRS Publication 946 explains all the rules for that deduction in chapter 2. You are limited, however, by the amount of the income from the business. Any amount of the deduction you don't get to use this year is carried over to next year.



That is casualty a loss. A summary of the rules for that are in IRS Tax Topic 515.

The IRS has a comprehensive explanation of the tax treatment of self-employed income in Publication 334. That's a good place to start when you have questions about business income tax issues.

Note that all the forms and publications I linked are for the 2023 tax year. They are still useful, however, for an understanding of how this works. There have no significant changes to these rules for 2024 (at least so far). The IRS typically has the new forms and publications up starting in late November and continuing through December.

You might want to consider having a tax pro (i.e. enrolled agent, CPA, or tax attorney) prepare your 2024 return at least for this year so you'll be able to see how to report everything properly. A lot of tax attorneys don't prepare income tax returns and if they did, the fee would be more than the enrolled agent or CPA. (I'm a tax attorney myself and the only income tax returns I do are my own.) Note that the 2017 tax act expires at the end of 2025, so there might be some major changes for 2026 depending on Congress decides to do next year about the sunset.

Hello,

Thank you so much for all the help information and links as well .

You have helped me more than once in this site and it's greatly appreciated not just by me, but I am sure many others that probably have the same question.

Thanks again!

 

[Tax Counsel]

Thank you so much for all the help information and links as well .

You have helped me more than once in this site and it's greatly appreciated not just by me, but I am sure many others that probably have the same question.

Thank you. I appreciate the compliment. I'm glad you found the information useful.