Even though I have been an independent musician for years now, I only recently discovered the plethora of tax-write offs available for those who file as professional artists. Read on to find out what you may have been missing!
The number one thing to remember about business write-offs (when filing as self-employed) is that your purchases must meet two criteria. According to the IRS, "a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary." Some "ordinary" and "necessary" expenses for musicians could include the following:
1) Music gear and equipment - Cables, instruments, stands, microphones, hardware.... write 'em off if you need 'em!
2) Music software - Is home recording a necessity for your music business? If so, then it's a tax break.
3) Music studio [recording, teaching, and/or rehearsal space] - This must be a dedicated space of its own that is used exclusively for music.
4) Office - A completely separate office space or an in-home office, which again, is solely used for business [Note: There are several factors necessary for a home office space to qualify. Speak with a trusted tax professional or accountant to find out more].
5) Office supplies - Self-explanatory [Business only, though. You can't buy a book of stamps and use half of them to send letters to your Aunt Linda in Minnesota.]
6) Equipment storage - If you genuinely need a paid place to store equipment, this can be a tax write-off.
7) Vehicle expenses - You can write off music-related expenses by mileage or by item. The IRS currently allows 57.5 cents/mile. If you use this method, keep a detailed log of distances driven and each trip's business purpose. If you go with the itemized option, keep receipts for gas to and from gigs, vehicle repairs while on tour, etc.
8) Travel - If you travel to and from shows, workshops, etc., you can write these off as business expenses [including lodging if the destination is far enough away from your home to qualify].
9) Food - If you have a business lunch meeting [and are truly discussing music - stay honest, folks], you can write off up to 50% of the food cost.
10) Concerts - If you are anything like me (and most other musicians out there), shows are a learning experience and a form of training in themselves. If you attend a concert with the intent of professionally improving yourself (aka consciously observing the show's flow, setlist, transitions, mixing, etc.), then you can write this off on your taxes. It's probably best not to be excessive and pay $300 for a front-row seat, though... ;)
- SAVE YOUR RECEIPTS: I cannot stress this one enough. Save your receipts [with dates and notes about what they were for; I like to write directly on the receipts themselves].
- Stay organized: The more organized you are throughout the year, the easier tax season will be. You can never be too organized when it comes to your files. Keep all of your deductions receipts in order; I use a binder clip and add each successive receipt to the back of my stack. If you only have a digital receipt, then PRINT IT OUT. I also have a notebook for my Income, and another one for my Deductions. I record all transactions with dates and other relevant information.
- Add as you go: Calculate your gross income, net income, and deductions at the end of each month. Go a step further and calculate a monthly tax estimate. Set that money aside for the end of the year.
- Find a mentor: I'm lucky to have an accountant for an aunt. Find a trusted source for financial questions. Other musicians can be great too, but only if they are doing their books legally and aren't trying to "cut corners" or sneak past Uncle Sam.
Any other tax tips? Comment below!
Contact me for Music Industry Mentorship & Coaching at firstname.lastname@example.org.
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