Is Streaming Music Service A Business Write Off

It'south tax season, and if y'all're a working musician, don't forget to write off all of your music-related expenses so yous can lower your taxes and keep more of the coin you earned.

The minute y'all set out to make money with music, y'all've crossed the line from a music hobby to a music business concern. This ways you lot need to adopt business thinking, strategies, and techniques. It also ways the authorities sees you as a concern likewise, which is why nosotros want to remind y'all of ane benefit of being a legitimate business organisation: keeping more income by taking tax write-offs.

Full disclosure: we're going to go into a list of potential write-offs in this post to give you ideas, only you lot should talk to a professional auditor about your own business situation and identify legitimate write-offs. Taxation laws change over time, and the all-time accountants will make certain everything you lot are doing is legitimate. In other words, we're not revenue enhancement accountants, but this advice should assist get yous to better sympathise the landscape.

That said, the 1 mathematical formula we share when giving talks around the state is:

The money you make – the coin you spend = the money yous keep

You are required to spend money on taxes, so each time you add a taxation write-off, you get to continue more than of your money! Of course, you should continue working on making more coin by borer new revenue streams. But the 2nd part of the equation is equally important: you should avert spending money yous don't have to!

Governments taxation income a business makes (the profits) and allow you deduct the costs y'all spend to legitimately bear out your business. Of course, in that location are tons of rules most what you can and can't deduct, but equally you volition see below, the number of potential write-offs that you lot are already spending coin on may surprise you.

Write-offs are only valid if you truly are a concern. You can't write off anything if you're simply a hobbyist and, unfortunately, music ever looks suspiciously like a hobby to the government. There are two ways to betoken that you take a legitimate music concern:

Create a company that y'all write off all of your music-related expenses through, such as an LLC, corporation, or partnership. Yous'll demand to continue track of everything through a dissever banking company account and tax filing which legitimizes the expenses.
Testify a profit. If information technology's just you playing music in your basement with a agglomeration of instruments that you've written off, you will likely not be seen as a business.

Track your business expenses

Making Money With Music To benefit from all of the write-offs you tin be making, you should exist tracking your business expenses throughout the year. You can do this with bookkeeping software like QuickBooks or gratuitous cloud-based accounting solutions such as Wave or SlickPie.

While we are not accountants, we rail all of our business concern expenses for our music and will share our research of potential write-offs you may qualify for. We recommend you lot get through your expenses from last year and see if you've spent money in these categories.

Gear and equipment

The gear and equipment y'all purchase and use can lose value over fourth dimension due to wear and tear, otherwise known as depreciation. The law recognizes this and allows you the pick to capitalize these costs over fourth dimension (for a set up number of years), which can lower your overall revenue enhancement bill. If that concluding judgement seems a fleck too deep into accounting, then nosotros recommend talking to an auditor to help you track this. They can help you determine what makes the most sense for you lot and whether you should rail your gear and equipment purchases on a cash basis or a capital basis and how much it tin can salve y'all each year. This category could include:

Musical instruments
Domicile studio gear (including the studio reckoner)
Live music gear (PAs, mics, lighting, live mixing boards)
Office equipment (printers, scanners, computers, etc.)

Software, social, and website expenses

Software costs may come in the course of purchases or through subscription fees. Sometimes, these are monthly, but others could be in one case a year, so brand sure to track these carefully. Nosotros've mentioned a few common ones below, merely your business organisation might have others. Take a wait through your twelvemonth of expenses and detect any that your business concern uses.

Music recording, mastering, and mixing software
Business concern/function software
Live music software
Art programs (also icon, photograph and graphic art subscriptions, and font sets)
Website hosting, fill-in, and related expenses
Domain hosting
Social media tools

Conferences and travel expenses

If you tour or travel for your music business, all of your travel expenses can exist written off. This includes any conferences you might attend. Whatsoever fourth dimension you lot're not at dwelling, you might be paying for things that are normally bachelor to you lot, and y'all should write those off as well.

Conference registration fees
Travel expenses
Lodging
Parking
Business meals (note: these are usually only fifty% deductible.)
Vehicle expenses (mileage or expenses related to your car)

Professional expenses

Your attorney, accountant, and all other professionals you lot utilise all charge fees that you may be able to write off.

Professional person services
Photographer fees
Graphic artist fees
Chaser fees
Accountant fees
Publicist fees

Concern and office expenses

Don't forget to write off everything related to keeping your business role.

Office computer
Shipping fees
Business cards
Function supplies
A percentage of your telephone and Internet service (there are rules to how much since it'southward recognized some of this is likely personal utilize unless yous accept a split up concern telephone)
Business licenses
Insurance

Merch-related expenses

Everything related to your merchandise tin be a write-off, and this is a specially important one to make sure to file. Otherwise, the IRS will assume you are receiving the full cost from each piece of merch you sell, when, in reality, you've spent money to purchase, store, ship, and sell it.

Merchandise purchases (when you buy your inventory)
Merch table/store tables and equipment
Fulfillment services
Shipping expenses
Warehousing expenses

Financial expenses

All of those fees yous pay for your credit cards, bank expenses, and payment processing fees are all fair game to write off. They are likewise the fees which you should work hardest to eliminate, since most of these things can be waived at their discretion if yous talk with your financial institutions.

Bank charges
Credit card fees
Financial fees
Payment processing fees

Music recording production expenses

There are expenses associated with recording and music production — from end-to-stop. Don't forget the software, the fees from every person who charges yous to aid brand the recording, and fifty-fifty the equipment yous take to rent. Information technology'due south a adept idea to keep track of what it costs to create each album or EP just so yous can know how much information technology cost you, just you can write all of these expenses off of your taxes.

Recording studio fourth dimension (or rent if you lot have your own)
Mixing engineer
Recording software
Mastering engineer
Studio musicians
Rental equipment

Alive music product expenses

Live music has many expenses associated with it, including space rentals, engineers, and all of the people associated with the live show that you demand to pay for.

Practice space
Alive audio engineer
Lighting engineer
Roadies
Security
Rental equipment
Costumes/phase props
Alive musicians
Advertising

Association/organization expenses

Nearly musicians belong to a host of associations and organizations, and you should write these expenses off. This isn't just limited to music organizations and associations. Any organization that you vest to which helps your concern can be a legitimate write-off.

PRO Fees
Music system membership fees
Business organization membership fees

Music distribution and promotion expenses

All of the expenses associated with distributing and promoting your music are legitimate write-offs and should defray your expenses.

Music streaming services
Music distribution fees
Advertizing fees
Music promotion fees

Training and research expenses

All of the training and enquiry you lot practice tin and should exist written off.

Research: books, magazines, etc.
Music lessons/coaching
Dance lessons
Online preparation sites (similar Lynda, Masterclass, and Skillshare).

— — —

It pays to develop the following ii habits for every expense related to your music business.

1. Runway every expense as y'all complete the purchase. This is easier to do when you lot take a carve up depository financial institution account and concern credit card for your expenses considering they will rails information technology for you lot. Otherwise, you need to carefully dissever your business organisation expenses from your personal expenses.

2. Accept a picture or scan every receipt you lot have and save it in a secure location. We recommend storing receipts in software that can read the text so yous tin can search through it with tools like Evernote or OneNote. This will permit you to discover the exact receipt in a unproblematic search without needing to resort to a filing method. Naturally, yous volition need these receipts in case the IRS wants you to justify these expenses.

The first fourth dimension y'all do this, information technology may accept some getting used to. But all of this is worth your time considering every write-off is more money in your pocket at the end of the year.

Related Posts
10 posts to help y'all make more money with your music
How to build a team of experts to support your DIY music career
How to turn music royalties into a cash advance
Merch strategies for your live streams
Maximizing your revenue when streaming live shows

Source: https://blog.discmakers.com/2021/02/tax-write-offs-for-the-working-musician/

Posted by: goodwinbutenway.blogspot.com