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For example: all the gas and tolls he accrues driving to different house painting locations, or materials. The money he pays for materials is included in his pay, is that considered gross income? And what about travel to galleries?

You don't have to file two separate Schedule C's for the different businesses, but it may be cleaner if you did, and if you were audited it would make the auditor's job easier.  As for what is deductible, I would suggest downloading a Schedule C and looking at the expenses.

Craig W. Smalley, E.A.

Admitted to Practice Before the Internal Revenue Service

  • You do not have to file 2 schedule C's, but I would recommend do so just for clarification purposes and for tracking the results of each business.
  • Any travel related to his business is deductible at the mileage rate currently in effect (56.5 cents in 2014 going down to 56 cents in 2015). Or, you can choose to use the "actual expense" method, which includes depreciation, gas, insurance, repairs & maintenance. Either way, you can deduct interest on the vehicle and tolls.
  • The materials he uses for painting pictures is deductible as they are used. In other words, if he buys $500 worth of paint in 2014 and has $400 in value left at the end of the year, you would deduct $100 in his "Cost of Goods Sold" for 2014 and account for $400 as "Inventory. This assumes that he had no inventory carried over from 2013.
  • You may qualify to take a deduction for a home office if you and he have a separately defined area of the home that is used specifically for the business (bookkeeping, storing supplies, art activities, etc.)
  • It would be simplest to include the money that he is reimbursed for his materials in gross pay and then deduct the cost of materials in Cost of Goods Sold. Again, if he has inventory remaining at the end of the year, you wouldn't deduct it until he used it on a job.

I'll be frank with you - you are making a mistake to self-prepare your return now that your husband is self-employed. There are just too many deductions you will miss to make it worthwhile. Please consider speaking to a CPA/EA experienced with small businesses and the home office deduction. He/she need not be local if you are comfortable meeting virtually.

Good luck and I hope this helps!

4 years later

closed Aug 10

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