DISCLAIMER: NOT TAX ADVISE. CONSULT A CPA.
Do you know how much tax you need to pay? Many musicians are unaware of the tax implications that come with running their own business, and end up paying more than necessary. This blog post will discuss some strategies for reducing your taxes as an artist or entrepreneur. These strategies include filing a Schedule C (instead of a Schedule A), claiming certain deductions, and taking advantage of any benefits offered by the IRS.
Filing a Schedule C: When you file a Schedule C, you are declaring your business as an official entity. This can be helpful when it comes time to pay taxes, as the IRS will see your business as its own separate entity. This also means that you will need to keep track of all your income and expenses separately from your personal income. If you are receiving any support from your family or spouse for this business, it will be important to account for that properly so as not to create unnecessary confusion with the tax man!
Claiming deductions: Artists can deduct their supplies like canvases and paint when filing taxes (as long as they were used exclusively in an art-related business). You can also deduct the cost of advertising, promotion, and even travel expenses related to your work. When it comes time to file your taxes, be sure to consult the IRS website or a tax specialist in order to find out which deductions you are eligible for.
Taking advantage of benefits: The government offers a few helpful tax benefits that you might be eligible for, such as the Lifetime Learning Credit or American Opportunity Tax Credit. The government also offers a few helpful business-specific tax deductions and credits like Section 179, which allows artists to deduct up to $500k in equipment costs. Be sure to consult your accountant when it comes time to file taxes!