Recent Grads Need Help With Taxes and Recordkeeping

This is from Jess and came as a comment to my post Designers Dozen: Tax Saving Tips for the Graphic Artist . Since it is typical of questions I receive from recent graduates I decided to give it more attention.

Graphic design students head out upon graduation, most of them toward freelancing, without a clue about how to handle income and expenses.

From Jess ... Thanks for this great article. I graduated from a graphic design school 3 weeks ago and have just started working full time as a graphic designer.

I have the receipts from the expenses during school, my mac, books, the course itself and going along to design based events. Can I claim any of these items? I use the same mac bought at school in my current position and I look at the books I have? I was also wondering if you knew about phones and phone bills if used for business?

THANKS HEAPS for your time! It is wonderful being able to access this information.
Jess


Congratulations, Jess, on both graduation and the work you got.

If you were not working or actively seeking work while in school you cannot deduct as business expenses any of the costs you incurred.

You can, however, deduct assets. In your case, assets are things -- computer, books, any kind of equipment. Your cost-basis for deducting these things -- in other words, the amount considered your business expense -- is not what you paid for them but their fair-market-value on the day you started your business. That means the day you started looking for work.

For instance, the fair-market-value of your Mac would be what some other graphic designer would pay you for it on that day.

The same with your books. Think of it as: On the day you tossed your cap in the air and said you were ready for clients, what would an incoming freshman pay you for your books? That amount is the fair-market-value of the books and your basis for deduction.

Hope that helps.

And thanks. Happy that my is helpful.

-- June