Monday, March 19, 2018

A Musician's Guide To Top Tax Deductions | hypebot

1It's tax season once again, and for those fortunate enough to be working as self employed musicians, this means an opportunity to claim a number of deductions and expenses when filing your tax return.


Guest post by TurboTax from Soundfly's Flypaper

Editor’s Note: We found this article on how to claim certain tax deductions as a musician, and loved it so much, that we decided to reach out to them to ask if we could repost it. So we called them and spent like 20 minutes on the phone with some very nice people before they admitted they actually had no idea who wrote it or who to even ask about permission. Given that, we’re just going to post it because it’s that useful, but if someone from TurboTax sees this, please let us know! We’re happy to take it down or give you extra props because you really wrote a great article.

The chance to be creative — and the opportunity to be your own boss — makes working as a musician exciting. Here are some of the top business deductions and expenses for self-employed musicians, as well as some tips to guide you through filing your tax return.

Your Studio or Workspace

Running a music business likely requires certain monthly expenses, and you can claim these as deductions to reduce your tax liability. These include:

  • Booking fees for recording studios
  • Rent for classroom or teaching space
  • Utility costs for your workspace

Launching and maintaining your music business usually involves paying some basic business expenses, and you can deduct these on your tax return. Note that expenses related to a home studio are deductible, as are:

  • The costs associated with registering for a business license
  • Maintaining insurance
  • Fees associated with maintaining your website, like domain registration and monthly hosting

Other allowable deductions include:

  • Membership fees to professional associations, like the American Federation of Musicians
  • Professional services necessary for your business, such as lawyers’ fees and tax preparation costs

Note, too, that when you attend functions sponsored by industry associations like the National Association of Music Merchants, or NAMM, and Audio Engineering Society meetings, your travel, lodgings, meals, and attendance fees are deductible business expenses as long as there is a business reason for you to attend.

Instruments and Performances

2As a musician, some of your greatest costs — your instruments, cases, bows, music stands, even your music library — are usually considered capital expenses. You’ll pay for them upfront, but use them over several years, as opposed to regular, ongoing costs like rent and utilities.

While you might not be able to claim the entire upfront cost as a business expense, you may be able to claim some of the cost in small increments over time (a process called depreciation).

Keep all receipts for travel to lessons, recording sessions, and performances on tour, as you can claim the mileage come tax time. Instrument upkeep and repairs, and the cost of consumable goods like rosin, are also deductible expenses.

Musical Events

Deductions often overlooked by musicians are the costs of such things as tickets, transportation, and parking, incurred when you attend other musicians’ performances. You attend these performances in order to enjoy them, but also to learn about musical trends, which makes them deductible.

Strategies for Success

For all the expenses you plan to deduct, you’ll need documentation in the form of bills or receipts. Keep all of your receipts in a series of folders. For example:

  • Put home utility bills in one place so you’ll be ready to calculate your home office deductions at tax time.
  • You may also receive a series of 1099 forms from your clients before tax time. Keep these and all other records of your income in one folder to easily calculate your total income.

Review income and expenses monthly, organize your bills and receipts as needed, and ensure you’re setting aside enough money for your quarterly estimated tax payments if you are required to pay them. Monthly review and adjustments help spot any missing documentation.



No comments: