Tax Writeoffs

Discussion in 'The Sound Hound Lounge' started by tcmono, Feb 27, 2012.

  1. tcmono

    tcmono Member

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    So I've been a gigging musicians for many years, and I've never tried to write anything off before. I started up a new band last year and bought a bunch of new gear. We gigged some and made a relatively small amount of money. I'd like to write off the gear I bought as a business expense, and Turbo-Tax doesn't seem to have a problem with it. Anybody else write off their gear as a business expense as a semi-pro (gig 24 times per year)?
     
  2. Omega

    Omega Member

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    It is a legitimate business expense. FYI if you sell it, you will need to figure gain/loss.
     
  3. EricPeterson

    EricPeterson Member

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    Are you claiming the gigging money as income?
     
  4. tcmono

    tcmono Member

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    Yes I am claiming the income. For 2011, the expense was a lot more than the income.
     
  5. EricPeterson

    EricPeterson Member

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    Then I think you can write it off as a business expense (but I am not a tax attorney), I would caution that it will likely raise a red flag for auditing purposes so you will have to determine if the write off is worth the risk of an audit.
     
  6. tcmono

    tcmono Member

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    Thanks for all the input - and - just to make everyone more comfortable - I'm not seeking tax advise as much as seeking input on what others do.
     
  7. sws1

    sws1 Member

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    You probably can't write it off in 1 year, since it's not really an expense...it's a capital outlay. Hence, you write some off each year for 5, 7, 10, 15, 27 or 30 years, depending on what you buy.
     
  8. guitaristanyc

    guitaristanyc Senior Member

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    I file as a musician and write off all gear purchases (which often gets me some nice returns). I was audited once, but just sent in copies of all my receipts and the IRS left me alone. You should go see an accountant - and not TGP members - if you have questions. :)
     
  9. Jason UP

    Jason UP Supporting Member

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    you can write it off. You can use what they call "bonus" depreciation or otherwise "section 179" to take it all in 2011. Just ensure that you say the gear is business use, which it is. You capitalize it as a business asset, then make the appropiate election to 100% depreciate...in your case just use "bonus". Section 168 I believe it is. Anyhoo, when the asset is sold, you'd have $0 basis and all proceeds on sale would be gain. It's all just one big deferral nutshell game really. I'm a CPA and our firm does some returns for a couple of national musicians / producers / sound engineers and all musicians who report income should treat the gear they use as business assets and capitalize / maximize depreciation accordingly. In 2012 the 100% bonus rules go away, by the way. But 179 will still be around in a lesser capacity (nothing that affects musicians though unless BIG gear spending going on).

    As far as audit risk goes that someone mentioned above, fugetaboutit. You're small potatoes (no offense haha).
     
  10. Omega

    Omega Member

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    This is correct. Section 179 if the gig money is high enough. If minimal, then depreciate it over 5 years.
     
  11. HurricaneJesus

    HurricaneJesus Member

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    I wrote off my gear purchases this year for the first time. Turbo Tax makes it pretty easy. It even let's you choose over what timeframe you'd like to depreciate.
    I even went so far as to write off my magazine subscriptions and cds as study materials. Just hang onto receipts.
     
  12. ggwwbb

    ggwwbb Member

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    So, in order to write off, you have to report gig earnings, correct? I gig maybe once a month and it probably over the course of a year doesn't add up to much, but I don't report it.
     
  13. Omega

    Omega Member

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    Do you get 1099's from the clubs? If so, then you need to report it as income. Then you report your expenses related to that income.
     
  14. tcmono

    tcmono Member

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    According to the IRS rules I read, you have to show a profit 3 out of 5 years. Check this yourself on www.irs.gov, search for "hobby". If you get classified as a hobby, you can only deduct up to your earnings. They take "start up" costs into account. For example, I just started gigging in 2011. In order to get ready, I bought some amps, pedals, pedal boards, mics, etc. Turbo Tax said I could deduct 100% in 2011 and not depreciate. My earnings were pretty low (about 10 gigs), while my expenses/investments were pretty high. I expect I'll have to show a profit sometime to justify the write off.
     
  15. Dave Klausner

    Dave Klausner Member

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    Here are some good articles you may want to check out. The first article speaks directly to musicians and briefly explains travel, meal, vehicle, and equipment expenses (for both gigging and studio musicians), and whether or not you can deduct them on your taxes.
    http://www.artstaxinfo.com/musicians.shtml

    Here is a "nuts and bolts" explanation of Section 179 (first-year depreciation allowance for equipment) and how to take advantage of it.
    http://www.section179.org/

    Congress is considering a compromise tax deal that would extend and expand the depreciation bonus through 2012.
    http://www.depreciationbonus.org/

    Here is a list of common deductible business expenses. This can be helpful if you are considered self-employed or if you own your own studio.
    http://www.musicbizacademy.com/knab/articles/taxtips.htm
     
  16. Lucidology

    Lucidology Member

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    Been doing it every year forever now it seems ...

    Have found that listing every item will more likely raise a red flag other then just submitting an over all sum...

    But you've a lot of good suggestions here so good luck
     
  17. oxtone

    oxtone Member

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    Been writing off gear purchases and gig car mileage for years now. I have a
    professional financial group co. do my taxes every year, as I'm completely self-employed.
     
  18. plisken

    plisken Member

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    Certainly do not have to be a tax attorney to discuss and advise on deductable business expenses. Also, claiming legitimate business expenditures as deductions does not trigger an audit.
     

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