15 Tips to Help Musicians Track Their Expenses & Reduce Taxes
15 Tips to Help Musicians Track Their Expenses & Reduce Taxes
In the dynamic world of music, tracking expenses may not be your top priority. However, it's a crucial practice that can significantly reduce your tax burden and help you manage your income more effectively. As a musician, you have numerous expenses that can offset your income. This article will provide you with a comprehensive list of these expenses and a simple, straightforward trick to keep track of them throughout the year, giving you the confidence to manage your finances effectively.
- Instruments & Accessories: In most cases, you can expense the entire cost of any instrument less than $2,500. The other option is to depreciate the instrument over a 7-year period. Accessories will cost less than this threshold of $2,500, but make sure you track the cost of strings, picks, straps, tuners, capos, batteries, and drumsticks, to name a few.
- Software and Apps are everywhere. If you must purchase any of these for your music business, they are completely deductible from your income.
- Transportation to and from gigs, rehearsals, and meetings is a substantial expense in the music industry. Tracking these expenses is important, as they can be a significant tax deduction. If you're using your own car, keeping track of your mileage is crucial. There are apps available for mileage tracking, and the current deductible rate is $.67 per mile. However, you can't claim both the mileage deduction and the cost to run your car. Use a mileage tracker if you don’t track your gas and car expenses. This is particularly useful if you use your vehicle for both your music business and personal use.
- Rehearsal Space Rental: When you pay someone to rehearse, pay in a way that you can track this expense. If you must pay cash, ask the person you paid to write a receipt for you.
- Promotion Materials such as posters, flyers, and business cards are all expenses that are directly related to your income.
- Online Presence is crucial. Domain names, websites, and related costs add up.
- Social Media Advertising is a method you need to get your music heard. The cost of boosting posts is something you need to track.
- Merchandise Production: Small amounts of merchandise can be expensed in whole. However, if you carry large amounts of merchandise, tracking the inventory and matching against sales is a preferred method of accounting for merchandise. An accountant can help you keep an accurate account of the cost of goods sold related to your merchandise.
- Subscriptions for online lessons, music publications, or educational materials for your business are all deductible. Don’t forget about any workshops or seminars you have to pay for.
- Clothing for gigs and photo shoots can offset income in the entertainment industry. That is cool.
- Streaming Services you use for research can be justified as a business expense. If someone asks why you deducted it, make sure you have the answer and that you are using it for your business.
- Office Supplies are necessary for any business. Your computer, paper, and pens are business expenses.
- Food and Drinks go with the business. If you entertain for your music business and foot the bill, you can classify these as business expenses, and you can include the tip, too.
- Audio and Visual Equipment such as your phone, headphones, and microphone stands are expensed the same as instruments with the same $2,500 threshold.
- Event Tickets you purchase for networking are also a deductible expense from your income.
Ok, how do you track all this? It is easy. Get a separate bank card or debit card for your music business, and there will be a paper trail for your expenses. Receipts are good to have, but sometimes they get lost. A bank account will always have a record for you and can be linked directly to your accountant's software. Having this method to track your expenses is simple and easy. Finally, your accountant will love it if they can easily tell you how your business is performing.