Scrapping and Taxes

Hello,

This is my first year making any kind of actual money from scrapping. I kept records for everything, including milage driven exclusively for my "recycling business". This includes milage driven looking for scrap, picking up items from people off craigslist, driving to the post office to ship something I sold on ebay while scrapping, etc. Are these miles deductible? I am 99% sure they are, which is why I kept track of them, but just curious if anyone who has been scrapping for a while (and who reports their scrapping income for taxes) has deducted milage for scrapping and can confirm it worked out fine.

Thanks!

Uggh .. yuck .. taxes !

*** Disclaimer *** I'm no tax specialist. YMMV

The scrapping money would be considered self employment income. You want to make sure to keep careful track of all of your business expenses. (You may actually find that your business lost money during your first year.)

The vehicle expense thing can play one of two ways.

If you have a newer vehicle it's generally better to take out mileage.

If you have an older vehicle it's often better to take out actual expenses like gas,oil,tires,repairs, excise tax, insurance, registration, inspection, and so on.

The easiest way i found to file is with Turbo Tax for business. It will walk you through the whole process one step at a time and tell you which method is best to use in your own particular situation.

It will double check your work at the end of it all and let you know if there are any problems.

I am no tax expert, but I have no financial gain. The yard weighs what I bring in and pays me exactly what it is worth... We are even. No gain either way. Now, if my labor added value and they paid me for more than exactly what it was worth, then I would have to pay taxes on the difference between what I got paid and exactly what it was worth. Or, if someone were to pay me with scrap metal for work I performed for them, I would have to pay taxes on scrap metal I was paid with.

Originally Posted by hills

Uggh .. yuck .. taxes !

*** Disclaimer *** I'm no tax specialist. YMMV

The scrapping money would be considered self employment income. You want to make sure to keep careful track of all of your business expenses. (You may actually find that your business lost money during your first year.)

The vehicle expense thing can play one of two ways.

If you have a newer vehicle it's generally better to take out mileage.

If you have an older vehicle it's often better to take out actual expenses like gas,oil,tires,repairs, excise tax, insurance, registration, inspection, and so on.

The easiest way i found to file is with Turbo Tax for business. It will walk you through the whole process one step at a time and tell you which method is best to use in your own particular situation.

It will double check your work at the end of it all and let you know if there are any problems.

My wife has ran a business for many years, and we always us "turbotax for business" to file our joint taxes. It'll just have 2 businesses this year I guess! I have kept track of everything, recipts, scrap yard tickets, milage, etc, etc. According to my spreadsheet, I was profitable this year (even after milage expense deduction), but not by much lol.

Afraid not that is income. What you have to pay taxes on is the difference in what you purchased it for and what you sold it for.

Originally Posted by t00nces2

I am no tax expert, but I have no financial gain. The yard weighs what I bring in and pays me exactly what it is worth... We are even. No gain either way. Now, if my labor added value and they paid me for more than exactly what it was worth, then I would have to pay taxes on the difference between what I got paid and exactly what it was worth. Or, if someone were to pay me with scrap metal for work I performed for them, I would have to pay taxes on scrap metal I was paid with.

I dont think that works like that unless you are scrapping things you paid money on, and are scrapping for less than that. You dont pay taxes based on the difference of price between what an item is worth and what you sell it for.

For example, if you buy a stove for $300, use it for 5 years, then scrap it for $5, you do not owe taxes because technically you didnt make any money off that, you actually LOST $295.

However, if someone gives you a stove for free, and you sell it for $5, you owe taxes on the $5. In business, revenue - expenses = profit, and you are taxed on profit. So in example one, the revenue is $5, expense is $295, so profit is -295. The other example its $5-$0 for $5 profit, which you owe taxes on.....

This is also how taxes on stock work (although its a different tax than income tax). If you buy a stock for $10, and sell for $20, you owe tax on the $10 of profit. If you buy a stock for $10, and sell for $5 you have a loss and dont owe taxes. Same with metal/scrapping I would assume, taxed on the profit.

I think i bought up the "I paid $1499 for this 25 inch TV in 1992 & sold it for $5. Thats not a $5 profit, thats a $1494 loss.."
A few years ago. Great in theory, i could offset a lot of taxes on that one item..

But nah, its not like that, with scrapmetal its changed form when you extract the metal from it & thats where it starts.
You can claim all those expenses, but not from the original price.
Somebody did quote American Tax law.