When you set out to be a musician, I’m sure taxes weren’t top of mind. But, now that you’re rockin’ and rollin’ (pun intended), reality has set in and you know that Uncle Sam is expecting his piece of the proverbial pie.
You may not realize it, but as an independent musician, the IRS treats you as a business owner. That’s great news for you because business owners are able to deduct their business expenses.
Like any other business owner, musicians are able to deduct any expenditures that are “ordinary and necessary” in carrying on their trade or business.
However, musicians have unique needs that allow for a wide variety of write-offs that might not be available to those in other industries.
In this article, we will outline 9 of the best tax deductions for musicians:
- Gear and Equipment
- Home Studio
- Professional Fees
- Advertising and Marketing
- Education and Training
- Music Production Costs
Tax Deductions for Musicians
1. Gear and Equipment
What musician doesn’t love new gear? Few things in life are more exciting than grabbing that guitar or amp you’ve had your eye on for years.
As a “gearhead” myself, this is my favorite tax deduction for musicians. In other professions, most business expenses are simply purchased out of necessity.
For instance, there’s not a single ounce of joy in my body when I write the multi-thousand dollar check for my annual tax software renewal.
But musicians? You would probably be spending a good portion of your paycheck on gear anyway. It’s just a bonus that Uncle Sam let’s you write it off.
Assuming that you make a living playing music, you can likely deduct your equipment purchases, including:
- Effects Pedals
- Road Gear
- Mixing Consoles
- In-Ear Monitors
Equipment purchases totaling $2,500 or less per item can be deducted, in full, in the year of purchase.
If the cost of a single piece of gear exceeds $2,500, that asset must be capitalized and depreciated over a number of years—usually 5.
In many cases, IRC § 168 or IRC § 179 can be used to depreciate most, if not all, of the cost of the equipment in the year of purchase.
Although your income level needs to justify the cost, there is technically no limit on how much money you can spend on gear as a musician.
I don’t have personal knowledge of his financial matters, but I’d bet that Joe Bonamassa has deducted every penny that he’s spent on his massive collection.
2. Home Studio
Musicians can deduct the cost of their home studios using the home office deduction, assuming they meet the requirements.
You can read in-depth about the home office deduction here.
How do you know if your home studio qualifies for the home office deduction?
- You don’t rent another office or full-time studio space outside of your home.
- Your home studio is your principal place of business.
- You use the space exclusively for business (it doesn’t double as a home gym or playroom).
- You use the home studio regularly (not once in a blue moon).
If you meet the requirements to claim your home studio as a home office, you will be able to deduct the business-use portion of your home expenses.
To determine your business-use percentage, you would divide the square footage of your home studio by the square footage of your entire home. That percentage would be multiplied by the total of your home expenses, including:
- Mortgage Interest
- Mortgage Insurance
- Capital Improvements (buildout)
- Cleaning and Maintenance
Note that direct expenses are not limited by the business-use percentage of your home. For instance, if you spent $500 to paint your home studio, that entire amount would be deductible.
On the other hand, if you spent $10,000 painting the exterior of your home, you would still be able to deduct the business-use percentage of that amount even though it didn’t directly affect the home studio.
3. Professional Fees
One of the biggest tax deductions for musicians is professional fees. Successful musicians rely on a strong team of professionals in their corner.
Although not all musicians need a big team, many find themselves paying the fees of:
Musicians can deduct the fees of any professional services they use for their business.
4. Advertising and Marketing
Just like any other business, musicians incur significant costs in their attempts to become known.
Whether it’s a session player trying to get the word out about their availability or a headlining artist advertising for their national tour—any costs associated with advertising are tax deductions for musicians.
Common advertising and marketing expenses for musicians may include:
- Digital Advertising (Social Media Ads)
- Fan Clubs
- Billboard Advertisements
- Print Advertisements
- Public Relations Agencies
Travel is—undoubtedly—one of the biggest tax deductions for musicians. Many musicians spend the better part of their year on the road touring.
While being away from home can be taxing, any costs associated with traveling for musicians are tax deductible.
Some of the most common travel expenses for musicians include:
- Ground Transportation
- Car Expenses
- Tour Buses
6. Education and Training
Musicians don’t just wake up one day and be able to shred. Most musicians have gone through years—even decades—of training to get their skills to such a high caliber.
The most successful musicians never stop learning. Thankfully, the IRS allows musicians to take tax deductions for the costs associated with honing their skills.
Education and training costs for musicians can include:
- Online Courses
- Coaching or Masterminds
- Concert Tickets
Supplies are often the unsung hero when it comes to tax deductions for musicians. Although the expense might be small, they certainly add up over time.
For musicians, supplies are the items you need to do your job that don’t fully rise to the level of being considered equipment.
The show quite literally can’t go on without these items:
- Guitar Picks
- Guitar Strings
- Guitar Straps
- Capos and Slides
- Instrument and XLR Cables
- Drum Hardware
Okay, this one isn’t exciting but I would be doing you a disservice if I didn’t mention it. Being a musician is a business and businesses have insurance.
Murphy’s Law asserts that what can go wrong, will go wrong.
I would suggest meeting with an insurance broker who is well-versed in music and entertainment to see if a small business policy would be right for your situation.
A small business insurance policy could cover damage to your equipment and potentially cover professional liability claims.
Another option is to add a rider on your homeowner’s or renter’s insurance policy to at least cover your equipment.
And, of course, the cost of insuring your business as a musician is tax deductible.
9. Music Production Costs
Last but certainly not least on the list of tax deductions for musicians are music production costs.
Let’s face it—making music is the name of your business. In some way, shape, or form, you’re always actively making music.
The expenses you incur to create music will be tax deductible for you as a musician. These costs can include:
- Studio Time
- Mixing and Mastering
- Session Players
- Recording Software
CPA for Musicians
By identifying and leveraging the tax deductions outlined in this post, musicians can amplify their earnings and minimize their tax liability.
It’s crucial to keep meticulous records of all your expenses, including receipts, invoices, and other documentation. Doing so will make it easier to claim these deductions and it will also provide necessary support should your tax return be audited.
If you are a musician looking for a Music CPA, we would be happy to speak with you about your specific circumstances!