US IRS tax credit for setting up garage lab?

[Tom De Medts]

Hi folks,

This question is for those of you who have setup an informal DIY /  garage lab at home.

I spent ~ $10K in 2020 on setting up a home lab, but this is not registered formally as a corporation or an LLC in the US.

I wonder if there are any clauses in the IRS tax code for 2020 that will allow me to subtract these expenses as a tax credit, so my Adjusted Gross Income would be lowered.

 Any and all advice about this would be greatly appreciated. Thanks in advance.

Best,

Tom

[Avery louie]

One thing that comes to mind is that there are home office deductions for 1099 income aka "non employee compensation". It's based on sq footage and rent not on the value of stuff in the lab/office. If you are buying capital equipment that is "expensive" you actually can't deduct the whole thing in one year either- it has to be amortized.

If you are spending $10k for equipment it might be worth buying a few hours of a tax-type person's time to figure out how you can reduce your tax liability. I do consulting work and having someone explain stuff to me makes my life a lot less stressful. I work with someone who also runs their own tax practice, so it's kind of cool because we are in the same boat. Unlike science, taxes do not follow any rules and I have found that basically nobody wants to be liable for making any statements about them, so good luck trying to find a blog post with definitive info...I didn't find any.

Side note/associated question: I wonder how people who do tech youtube blogs that sell things like stickers/subscriptions can deduct stuff that could reasonably be used for producing content.  I bet that's a pretty good model for a garage lab.

--A

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[Tom De Medts]

Hi Avery,

Thanks for your reply. I'd just filed my taxes online using H&R Block, before your email arrived. So I might need to file an amended return...

Based on your suggestion, I found this useful IRS document online: https://www.irs.gov/pub/irs-pdf/p587.pdf

I will look into page #21 of this PDF, this might be what I need to calculate home-based office deductions from my AGI.

Thanks again!

Tom

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[everymanbio.com]

I did exactly this, reporting my lab activities under a DBA reported on Schedule C. Any large equipment purchases will need to be depreciated but otherwise, you can write off startup costs, supplies, advertising, etc as you would in any other business. The loss from this business was deducted from my taxable income on the 1040. 

[Tom De Medts]

Thank you.

BTW, what is considered a "large equipment purchase"?

Is based on absolute $ amount, or as a % cutoff of expense for the startup and for that tax year?

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[Josh McGinnis]

You'll want to take a look at the IRS rules for what assets you are able to depreciate:
https://www.irs.gov/instructions/i1040sc#idm140094051153840

https://www.irs.gov/forms-pubs/about-form-4562

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