Join Richard Stim for an in-depth discussion in this video Deduct now or depreciate?, part of Taxes and Accounting for Music.
- You can deduct some expenses…in the year in which you incur them.…Others have to be deducted over a number of years,…with one important exception.…It all depends on how long the item you purchase…can reasonably be expected to last,…what the IRS calls its useful life.…Anything that has a useful of less than one year,…for example, studio rent, utility bills, photocopying,…promotional costs, postage and supplies,…must be fully deducted in the year it is purchased,…known as current expenses.…
Item that have a useful life of more than one year,…such as sound equipment, vehicles and instruments,…are called capital expenses.…Subject to an important exception,…known as the Section 179 deduction,…you must spread a capital expense over several years,…deducting a portion each year.…For example, if you purchased a $7,000 bass,…considered to have a useful life of seven years,…you would deduct $1,000 per year for seven years.…
By the way, the IRS follows this system…even if the equipment actually gains value over time.…Keeping track of depreciation can be a hassle,…
In this music business course, author Rich Stim covers the most important tax issues for musicians. He starts with the basics: determining if music is a hobby or a business for you and how that affects your deductions. He then discusses money and the sources that determine gross income. From there, he shows the items you can deduct from your gross income—mileage, studio spaces, touring expenses, and other miscellaneous deductions—that can add up to big savings. Next, he covers the different tax rules for individual musicians, bands, general partnerships, LLCs, and corporations, and explains how to get an Employer Identification Number (EIN) when you need one. Finally, Rich navigates through the tax forms, including Form 1040, Schedule A, Schedule C, Schedule SE, Schedule K-1 (Form 1065), Form 4562, Form 8829, and Form 2016, and provides advice on hiring a tax preparer or going the DIY route with tax software.
DISCLAIMER: This course is taught by an attorney (or other instructor) and addresses US law concepts that may not apply in all countries. Neither LinkedIn (including Lynda.com) nor the instructor represents you and they are not giving legal advice. The information conveyed through this course is akin to a college or law school course; it is not intended to give legal advice, but instead to communicate information to help viewers understand the basics of the topic presented. The views (and legal interpretations) presented in this course do not necessarily represent the views of LinkedIn or Lynda.com.
- Managing bookkeeping
- Counting income
- Claiming expenses and other deductions
- Understanding tax entities such as LLCs
- Getting an employer ID number
- Preparing and paying taxes