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Post Tax Day Question. Should I incorporate my hobby shop for tax purposes?

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Forum topic by gmaffPappy posted 04-17-2019 07:10 PM 457 views 0 times favorited 2 replies Add to Favorites Watch
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gmaffPappy

95 posts in 3105 days


04-17-2019 07:10 PM

Before paying a Tax Professional, I just wanted to throw this question out there to see if it’s even worth the time and effort.

I’m a computer consultant by day, woodworker by night, and want to retire doing nothing but wood. As a consultant, I often balance each engagement to determine the advantages of doing the engagement either W2 or 1099 through my own corporation. There’s a lot of factors that go into the decision, but a lot of the time, it makes sense to go 1099 for the tax deductions.

Could the same thing work to my advantage if I incorporate my WW Shop?

It would be nice to get the tax deduction on machinery and materials.

-- If it's easy to do, you haven't spent enough time over engineering it.


2 replies so far

View John Smith's profile

John Smith

2920 posts in 1237 days


#1 posted 04-17-2019 11:05 PM

with the tax laws changing faster than anyone can keep up with,
I would strongly suggest you sit down with a tax preparing professional
to see what your options are.
also with your insurance company to see how your “hobby” could
also affect your coverage.
many of us here went through this over the past decades from hobby to
full blown business with employees.
best of luck in all your adventures !!

.

.

-- there is no educational alternative to having a front row seat in the School of Hard Knocks. --

View unclearthur's profile

unclearthur

383 posts in 2862 days


#2 posted 04-19-2019 08:09 AM

I’m not an accountant but a couple thoughts,

If you already have a corporation, you don’t have to create a new one for a woodworking business, you can just use the one you have. Lower admin costs, less filings, and expenses can be deducted from profits of either. You can always register a separate trade name for the woodworking biz. If you have 2 corporations, taxable losses on the woodworking side may not be offset against profits from the computer consulting.

(Of course, the flip side of this relates to liability; if the businesses are combined in one legal entity and you get sued related to one business, the assets from the other biz will also be in jeopardy.)

In any case, the deductability of woodworking expenses will likely rely on whether you had a reasonable expectations of profits from those activities.

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