#MusiciansandFinance is musicovation’s blog series exploring finance for musicians. All posts are contributed by graduate students in New England Conservatory’s Entrepreneurial Music course Finance 101: What Musicians Need to Know taught by NEC alum Jessi Rosinski.
by Conrad Shaw
What are the most important things musicians need to know about finance?
Having a good understanding of basic finance is something that everyone can benefit from. Being practiced in the art of balancing a budget is a useful skill for absolutely anyone, and is almost essential to live in society. While there are certain aspects about finances that apply to all occupations, there are some aspects that have particular weight and significance when applying to a music career. I think the most significant is the use of taking deductions on taxable income. As a musician, particularly a self-employed one, one must understand and take advantage of the many deductions of taxable income.
Whether or not your main form of income comes from a salaried position, such as an orchestra, most all musicians are involved in at least some form of freelance work throughout the year. By doing this, you can claim that you are self-employed and take advantage of some of the many benefits from this status. The greatest benefit of doing this is you can claim deductions from your expenses as expenses for your self-employment, and therefore record a low income. By doing this, you are being taxed on less than what you have actually brought in for the year, because you used some of that money to fund your musical career.
What can I deduct? The obvious ones come to mind. Instrument. Anything from purchasing and instrument, to repairs, to buying accessories for the instrument as big as a tuba mute or as small as a guitar pick, all can be deducted from your taxable income because you made those purchases are considered an “expense for business purposes.” Where this begins to get really exciting is to go beyond the obvious deductions, and take advantage of citing every possible expense that is music related.
Do you spend time on your cell phone talking to contractors and colleagues about the next gig? How much time? Whatever it might be, you can deduct that portion from your cell phone bill. Do you drive back and forth from gigs or spend money on public transportation? If so, you can deduct that expense. What if you have to travel far and spend some nights in a hotel, or buy and airline ticket? All deductible. Any travel expense from renting a car to getting a meal on the road is entirely deductible as long as it is related to your musical career.
Taking these deductions can also become very detailed. For instance, if you use part of your home to teach lessons or do any sort of musical work, you can deduct a portion of your rent and utilities because it is being used as a home office. You can even take deductions on small purchases such as concert tickets. These are considered professional development and can be deducted from your taxable income. Other personal things such as massage or physical therapy can also be claimed as deductions as they provide support for your overall health of your career. And the list goes on and on.
When it comes to taking deductions from your income it is to your advantage to be as detailed and organized as possible. The more expenses you can record as being a part of your musical business the more deductions you can make to reduce your taxable income.
Want to learn more about what deductions you can take? Visit www.freelancetaxation.com and see list after list of all the different deductions you can take, and also learn some other great tips!