As I begin down the road of making my studio "legit," I'm wondering how to determine how much various pieces of gear have depreciated for the purposes of tax write offs.
For cars, there's either Kelly or Nada blue books. Is there some kind of depreciation schedule or "blue book" for audio gear used in studios?
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I don't think current market value and depreciation have any relevance to each other. One is an economic concept, the other is a tax concept. For tax purposes, I think you just have to find out what depreciation category the gear fits into, and use the relevant formula from the Internal Revenue Code.
But, then again, I'm not a tax advisor.
However, I do play one on TV.
Best to talk to a tax consultant and not try and DIY. The one thing you do not want to do is GUESS.
I have a very good tax advisior and he spends lots of time staying up on all the changes in the tax laws. Last year there were over 2000 changes that he had to know about. His services are more than paid for with the knowledge he has on how to save me money.
Hope this helps
Skeetch,
you should also check into something called a Section 179 deduction. If you take this deduction you can write off the entire amount up to $100,000 but there are certain rules that apply to determine eligability. Such as, you have to take the section 179 deduction in the tax year that it was purchased and you put it into service (eg. you can't have already used it for 2 years or more or you'll have to use the standard depreciation), you have to have a taxable income at least equal to or greater than the deduction, and a couple of other rules apply too. I think that the Section 179 deduction is probably the best way to go for anyone buying new gear for business use. You'll have a one time write off and you can avoid all the hassles with figuring out the depreciated value over time. Once again, check with an accountant but be sure to look into this.
The proper thing is consult a tax professional. Depending on how you set up as business, most captial items are depreciated over 5-7 years. Expense items are those that are consumeables and last 1-year or less.
There is a offical Blue Book meant for music and audio products current value but it doesn't cover all items, and can be way out wack in terms of fair market pricing as compared to market supply and demand pricing. Used and vintage items are even more of a crap shoot. I've read that good old Fletcher is a member of the Blue Book pricing consulting team. It might even be http://www.bluebook.com. I'm not sure. These books are expensive and can be found in pawn shops and some music stores that do store buys from walk in customers looking for cash.