From the course: Taxes and Accounting for Music
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Deduct now or depreciate?
From the course: Taxes and Accounting for Music
Deduct now or depreciate?
- 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…
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