tax questions for a DM...

[oregondiver]

In the past I have worked with police and fire on search and rescue (land and water boat/dive rescue or recovery) and was able to write off my gear and training that wasn't covered by the depts.

Now i work elsewhere ( Amazon..not in water/rescue business anymore lol) so don't have that write off. I am working towards my instruct..end of next year. This year I hope to have my DM done. Can you write off your training/insurance ect that gets you towards instructor? Out here..DMs here don't make money so it isn't like I have an income from it to offset, at least until I get my instr which is in a different calendar year.

Or do i need to create a business in this tax year to start the offset? We had f'd up taxes this year due to sale/buy of house and moving from income tax state to non income tax state ...so its going to be a mess anyway so these are things I am just considering to see if I can write off the training as I work towards my instructor. We will be interviewing tax peeps shortly but wanted to have an idea if possible or a resounding NO kind of thing.
Thanks

 

[TMHeimer]

There are several back threads on this. From what I know (Canada) you must have (significant?) income from your DMing to write off stuff. I would ASSUME you can't write off any courses--that would be like getting a college degree then trying to write it off against your salary afterwords. I would guess that if you have enough DM/Instructor income so that your scuba work activities qualify as more than just a "hobby", you would be able to write off insurance, agancy membership fees, equipment servicing, gas during work, etc. Best to check with your advisor/accountant. I have $900 income for 2013 and will find out if that's enough....

 

[Lorenzoid]

The IRS does not consider fees paid for coursework that qualifies you for a new trade or business to be deductible educational expenses. However, once you become a dive professional, then further educational expenses would be deductible. As a DM or dive instructor, if you are self-employed you could deduct equipment costs, too. But keep in mind that it has to be a real business that you conduct for the purpose of generating income, not a hobby. If it smells like a hobby to the IRS, they could deny deductions. There are a number of factors that the IRS would take into account, but profitability is a big one. If you turn a profit for three out of the past five years, it is more likely to be judged a business.

 

[Hawkwood]

There are several back threads on this. From what I know (Canada) you must have (significant?) income from your DMing to write off stuff. I would ASSUME you can't write off any courses--that would be like getting a college degree then trying to write it off against your salary afterwords. I would guess that if you have enough DM/Instructor income so that your scuba work activities qualify as more than just a "hobby", you would be able to write off insurance, agancy membership fees, equipment servicing, gas during work, etc. Best to check with your advisor/accountant. I have $900 income for 2013 and will find out if that's enough....

TM,

With CRA there must be an "expectation" of a profit to be made, i.e. year after year of writing stuff off with a net negative could eventually lead to some "inquiry" by CRA.

As to courses, it depends, as Lorenzoid said - same thing applies here in Canada. If your shop required you to take a PSI Visual Inspection course to continue to work as a DM, that course would be eligible for tax relief, again provided there is that expectation of a positive return over time. If you as a DM wanted to teach Emergency O2 Provider, to earn additional income, your fees to take the O2 Provider Instructor course would be eligible.

 

[Peter Guy]

Disclaimer -- I am NOT a tax professional nor did I stay in a Holiday Inn last night.

Here is some advice that may not even be worth what you are paying for it:

a. US "Hobby Business Rules" are pretty straight forward -- you can deduct expenses up to what you have earned

b. Precious information about not deducting cost of DM but being able to deduct further education appears to be correct

c. "There are some" who believe in the "It is better to ask forgiveness than permission" school of tax deductions. As long as you have a "colorable claim of validity" you are probably outside the area of fraud (fraud = not good). Then it is a matter of your particular risk tolerance. It has been claimed the IRS audits approximately 4% of all returns with 50% of that 4% being aimed at specific flags -- high number of dependents, extreme income, etc. What's it worth to you to take the chance?

For what it's worth, I've been audited by the IRS after submitting two years of significantly amended returns. My tax specialist had done all the right things and our alleged "Hobby Business" was found to be, in fact, an actual attempt to make money (and if you looked at it from an accrual, as opposed to cash, basis, a strong argument was made that it WAS profitable).

Whatever you do:

a. REPORT ALL INCOME

b. Have a business plan

c. Have a website, FB business presence, etc.

d. Have accurate records -- use accounting software to show you are running it in a businesslike manner

e. Go have fun

 

[TMHeimer]

TM,

With CRA there must be an "expectation" of a profit to be made, i.e. year after year of writing stuff off with a net negative could eventually lead to some "inquiry" by CRA.

As to courses, it depends, as Lorenzoid said - same thing applies here in Canada. If your shop required you to take a PSI Visual Inspection course to continue to work as a DM, that course would be eligible for tax relief, again provided there is that expectation of a positive return over time. If you as a DM wanted to teach Emergency O2 Provider, to earn additional income, your fees to take the O2 Provider Instructor course would be eligible.

Thanks. I would assume that the shop requiring you to renew EFR, etc. would also be deductible. I assume the DM course itself is not. Out of curiosity, what about the IDC should a DM take that? My guess would be no as it's not required to continue as a DM, though you already may be "in business" as a DM. What do you think?

 

[Hawkwood]

Ask the question: are you required to take a course in order to earn the income? If you are required to take the EFR in order to earn income as a DM then your tax person should have no issue using that to offset income.

You would be correct regarding the IDC.

Of course, I have never stayed at a Holiday Inn Express, so take the above at "face value".

Bill