Items you will need
- Record of income
- List of expenses and receipts
- Record of mileage
- Income tax form 1040 with Schedule C and Schedule SE
- Income tax form 8829 for home office deduction (if applicable)
- Income tax form 1040-ES (if applicable)
Filing taxes as a self-employed musician can be frustrating, as there are many rules pertaining to self-employment and what you can deduct as a musician. But if you keep a good record of your income and related expenses, you’ll make it easier on yourself come tax time.
Check to make sure you have a record of all of your income as a musician. All related income must be reported, whether or not you receive a 1099 from the person or institution that paid you.
Go through your expenses, as many of them are deductible. As a musician, you have unique deductions that will help you lower your taxes. These include the purchase of supplies, equipment, concert tickets, CDs, stage makeup and clothing, lessons, meals for meetings, promotional materials and other related expenses. Often, tax preparers label concert tickets, CDs and other related expenses as “research,” and they are perfectly legal to deduct because, as a working musician, you must keep up with the trends in your business. The trick here is to make sure you don’t go overboard; not all concert tickets and CDs are research, as some are most likely purchased for pleasure alone. Other expenses include overnight travel and equipment that can be depreciated over a number of years The latter includes expensive equipment that is used during your work that will last longer than a year, such as a drum set or a computer.
Include your automobile expenses if you use your vehicle for work. Automobile deductions can be made in one of two ways: mileage deduction or expense deduction. Mileage deduction simply allows you to report the distance you’ve traveled throughout the year for work using your vehicle. This can include going to gigs, rehearsals, lessons and making equipment and supply runs. You do not need receipts, but you do need to have a log that shows the mileage and the business purpose for each trip. The other method is to depreciate the vehicle and total the expenses, including gas and repairs. The second method requires more work and is usually best for larger vehicles, such as tour buses or vans.
Consider your home office, if you have one. If you have a full room or a dedicated space that is partitioned off from the rest of the room and you it exclusively for your work in music, then you can take a home office deduction. This space cannot be used for anything else except your business.
Fill out the income tax forms as precisely as possible, as per your records. Along with your 1040 for filing income, tax your Schedule C is for filing as self-employed while the Schedule SE is for self-employment tax. Form 8829 is for home office deductions and the 1040-SE is if your tax liability exceeds $1,000, which would require you to pay estimated quarterly taxes.
Consult a tax preparer. Filing taxes as a musician can be confusing, so it is important that a certified tax preparer help you, especially if you are filing as a musician for the first time. With experience, you will learn what you can and cannot deduct.
Remember to keep your deductions conservative. While you want to lower your taxes, you also want to avoid an audit.
Keep in mind that expenses must be connected to the music profession, must be considered “ordinary” and “necessary” and cannot be considered “lavish or extravagant under the circumstances.” For instance, if you are not considered a celebrity musician and you book a reservation at the Four Seasons during a tour, that may be considered lavish or extravagant. For a touring celebrity musician such as Sting, however, that may not be considered lavish or extravagant due to his high profile and his need for privacy and security.
If you are a musician as a hobby, you can only deduct expenses up to the amount of income you’ve earned.