by Frank Ippolito
Is your band a business or hobby? (Hint: This is focused on the former.)
There has been a lot, and I mean a lot, of talk about the lack of money bands are making these days. Horrible streaming rates, pay to play, this list goes on and on and on.
And, if you’re in a working band, you are probably spending a lot of your own money supporting your art every year – instrument costs, photos, videos, practice space rental, van rentals, gas money driving to and from gigs, not to mention the cost of producing and printing albums.
But did you know that you could probably recoup some of that money? Uh huh, you can.
First things first, you need to decide if making music is a business or a hobby. A business? Good answer.
Music is business.
The dear IRS says, “The music business…presents unique problems in an income tax audit.” For us non-tax attorneys, that means be careful. While you are entitled to deduct expenses you have to make sure what you can and cannot deduct.
To be “in business” the bean counters at the IRS need you to prove that you are in the music business to make a profit. Playing shows will not cut it. The IRS wants to know if you are doing things that every business does, such as keeping records…a pain in the ass, but worth it.
But the good news is that you do not ever need to actually make a profit (not a problem for 99% of us…). Although, failing to do so three out of five years may increase the chances of the IRS knocking on your door.
Yes, it’s a total bitch. But you need to start acting like a business. Here’s a good checklist to get you going:
• Make sure you are operating like a business
• Keep good books and accurate records
• Get business cards
• Copyright your work
And this is a very short list.
Schedule C is your best friend. EVER.
To deduct business expenses, fill out a Schedule C and file it with your Federal Form 1040. You can find this and other forms on the IRS website, here.
The IRS states, “Business deductions must be an expense that is ordinary and necessary (so no, that six-pack for rehearsal, while ordinary, is far from necessary, sorry).
Here’s what you can deduct:
• Consumable supplies like drum sticks, guitar strings, etc.
• Music business books, record company directories, the big book of songs
• Gas money getting to and from gigs
• Promotional items, CDs, duplication, album covers
• Rent for your rehearsal space (Yes, your house counts. In fact, you can even count your house as a home office – you’re in business dammit!)
• Copyright and registration fees
• Travel expenses
• Food (yes, Cheetos count)
There are so many more things a band can do to take advantage of the tax code; it’s impossible to list them all here. So, do your research and get what’s coming to you.
Last point: get an accountant. Better to have a pro help you with your taxes than doing them yourself. And guess what? The cost is tax deductible.