Unlikely deductions for creative freelancers.
By Jenny Hoff, Photo by Soundtrap
It’s tax season, and if you’re lucky enough to be a working musician, it’s time to get your receipts in order to make sure you don’t pay more than you must. For creatives, there are many deductions that can significantly bring down your taxable income.
You may already know that you can deduct your travel expenses for a gig, depreciation of your equipment and the cost of studio space, whether it’s in your house or rented in another location. But with creative jobs like music, art and theater, other expenses add up that you may not realize you can also deduct.
Traveling and planning to catch a show while you’re away? Deduct. Subscribing to a music streaming service, getting professional photos taken, printing out fliers? Deduct. Going to a concert with friends? Deduct. According to TurboTax, “You attend these performances in order to enjoy them, but also to learn about musical trends, which makes them deductible.” That includes your travel to the concerts, the tickets and parking costs. If you’re a writer, the same goes for book conferences or author lectures; an actor can deduct the cost of going to other theatrical performances. Other costs that may be deductible depending on your creative career include:
- Headshots
- Social media campaigns
- Netflix and other streaming services (for actors, as a research deduction)
- Hair services
- Union dues
- Promotional materials
- Costumes and accessories
- Equipment
- Website maintenance
- Office supplies
- Home utility bills
- Travel (as long as there is an educational or business-based element involved)
- Seminars
Of course, your costs would have to add up to be more than the standard deduction, and you’ll want to have receipts for proof in case of an audit.
Save on taxes and save for retirement
If you’re not in a traditional job that has 401(k) benefits—tax savings vehicles to help you prepare for retirement—you should consider taking advantage of the 401(k) options designed specifically for self-employed freelancers.
Two of the most popular options for creating a retirement account that includes tax benefits are a SEP IRA and a Solo 401(k). A SEP IRA allows you to contribute up to 25% of your business’s income (up to $61,000 annually) tax-free into a traditional retirement account. It will also grow tax-free until you take it out at retirement age. Even if you have a full-time day job with a traditional 401(k), you can still take advantage of a SEP IRA by stashing away some retirement money from your shows.
A Solo 401(k) doesn’t restrict you to only contributing a certain percentage of your pay. You can contribute all of it up to the annual maximum of $61,000. You can also make employer contributions, which allows you to save more (as both the employee and the employer). There is also a Roth version, which allows you to pay taxes on your income going into the fund, but when you take it out (presumably at retirement) you don’t have to pay taxes on the growth.
It’s worth doing a little research on the options available to you. While a rock ’n’ roll lifestyle might be a fun way to live while you’re young, you’ll be grateful for the forethought you put into stashing some cash away once the music days are behind you.