In this week’s article, I’d like to continue discussing taxes as they apply to indie musicians. Last week I talked about the US self-employment tax. This week, it’s tax deductions. You should review the following list of possible tax deductions for musicians (in the US), and decide if itemizing your deductions and including them will save you more money than simply using your standard deduction. This list is not comprehensive, but it will get you thinking along the right track. The following expenses may be deductible for artists who treat their music as a business:
1. Instruments / supplies / mics / amps / etc.
2. Recording equipment
3. Studio rental fees
4. CD production costs
5. Travel expenses for getting to your gigs
6. Your van / bus / etc., and related expenses, if you tour
7. Hotel rooms if you tour
8. 1/2 of your meal expenses while on tour
9. Fees paid to your manager / publicist / booking agent / lawyer / etc.
10. Promotional expenses (flyers, business cards, merch you give away, etc.)11. Rental fees for equipment you didn’t buy
12. Parking / tolls / and other travel expenses for shows
13. Gifts to industry professionals (up to $25 is deductible)
14. Music business books / directories (or other books / software you need to manage your band’s business)
15. Copyright and trademark fees (for your songs and band name) if they’re registered
Remember that in order to deduct the items listed here, you need to file an itemized tax deduction, and you will need to operate your band as a business. If the IRS later rules that your music is a hobby, rather than a business, you may end up owing back taxes and penalties. You can avoid this by registering your band with your state as a business, filing a dba form (“doing business as”) with your state – there may be a fee for this, and operating in a professional manner (keeping contracts, receipts, a business plan, and full financial records just to get you started).
You also need to remember that in the US, you need to report all of your income, and that includes everything you make as an indie musician. If you have to pay your taxes on the income, you might as well take the deductions allowed to you for the expenses involved.
As with any tax matter, your best bet is to consult with a tax professional before filing. And guess what; the fees you may them would also be deductible!