Many thanks to Michelle for her recent helpful and readable post about tax deductions. I can see by the comments that (no surprise) there’s some confusion as to how to interpret things.
I’ve personally found it a little confusing, even if I know what to deduct. Which category of deduction do I put Music Teachers Helper in, for example? See below. What I’ve done here is to reproduce some examples from IRS publications for you. The IRS even specifies some expenses that are suitable for musicians.
Consulting an accountant is usually a good idea because these are only examples and there may be specific situations that you will need clarification on. My preference, instead of paying an accountant, has been for many years to use a good accounting software because it takes you through all the steps, asks all the questions, incorporates all the latest changes, and makes sure that you have everything right, and explains things if you’re not sure. I’ve found that TurboTax has done a great job for me–here is a link to getting TurboTax if you’re interested. It includes your state forms and efile as well. (It’s deductible, too, of course!)
Business deductions are relevant to musicians who use Schedule C on their taxes, which you need to do unless all your income is from wages on W2 forms. The deductions below are broken into these categories: Mileage, Home Office, Meals and Entertainment, Advertising, Supplies, Office, Dues & Fees. Remember that you need receipts for everything, to back up your claims.
MILEAGE: musicians and teachers often drive a great deal and this year you can deduct over 50 cents a mile. You can’t deduct mileage if you’re “commuting”, in other words, if you’re an employee and drive to and from work. But if you drive to other places than your primary place of work, or if you’re not an employee but work for yourself, you can deduct mileage as you drive to various locations for any business purposes. The catch is that you have to keep a written log of your odometer readings, dates and destinations.
HOME OFFICE: you can deduct utilities and other expenses for maintaining a home office space based on what percentage of the home it is, only if it is a space you regularly and exclusively use to meet with students or do only business work; it doesn’t have to be a separate room or have a separate entrance.
MEALS AND ENTERTAINMENT — IRS examples include:
–meals where you meet with an interview subject, agent, editor, agent, manager, lawyer, accountant, or with colleagues at an event or retreat to do with your work
–meals while traveling to gigs, workshops, etc.
–tickets to performances that relate to your work
ADVERTISING — IRS examples include:
–promotional photos and videos
–brochures, mailers, flyers
–newspaper, magazine, TV, radio ads
–fees for listing services, PR services
–website creation and hosting expenses (Music Teachers Helper can fit in here or see below under Supplies)
–promotional giveaways such as CDs (deduct your cost)
–signs, banners, bumperstickers
–ads on the web, in Yellow Pages
–marketing emails or direct mail
–costs for promotional events
SUPPLIES — IRS examples include:
–music stands, cases, gig bags, transportation carts
–reeds, picks, oil, strings
–sheet music, music paper, notebooks
–tuners, effects pedals, metronomes
–mutes, mouthpieces, microphones
–books for a curriculum
–monitors, amplifiers, speakers
–blank media, CDs, tapes, recorders, memory cards
–music filing envelopes and boxes
–bottled water for performances
–reference books, study guides
–GPS systems, map guides
–pens, pencils, paper, paper clips, tape, staples, staplers
–stamps, labels, envelopes, mailers
–software for keeping track of billing and expenses (Music Teachers Helper could fit in here or see above under Advertising — as long as you don’t duplicate your expense, either category is justifiable)
OFFICE — IRS examples include:
–business membership fees to superstores like Costco & Sam’s Club
–pickup and delivery services
–bottled water delivery
–costs for backing up data
–office decorating expenses
–cable line if separate for your office
DUES, LICENSES AND FEES — IRS examples include:
–social security, medicare and unemployment taxes
–professional license fees
–fees for professional organizations