Use Depreciation to Show a Profit

Sometimes you have a choice about whether or not your business will show a profit on paper. For example, imagine that if in the first year of your eBay business, you incur $6,000 in expenses — most of it for computer equipment. If you deducted all of those expenses from your income, as you are entitled to do, you may show a loss. But, as explained in the chapter on paying taxes, you have a choice when it comes to these deductions. Instead of deducting the full amount of the equipment in one year, you can depreciate some or all of it over three or five years (depending on the equipment), which may allow you to show a profit in your first year. This would also provide deductions for the next year, when presumably your expenses would be lower and your income higher. Learn more about tax strategies in the sections Paying Your Taxes and Tax Deductions, or from your accountant or tax preparation expert.

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