As an Artist or Creative Tax Season can be daunting or seem limiting to the untrained eye. It’s not uncommon to owe money back to the IRS at the end of the year if quarterly payments are not made as a business or as an individual/sole proprietor if you’re doing contractual work. However, the truth is Tax deductions, if you know what to look for, can be a taxpayer's best friend. Understanding the intricacies of tax deductions can empower taxpayers to make informed decisions and optimize their financial strategies throughout the year including budgeting, tracking, and correct allocations.
Now, you may be saying to yourself, “I can only do but some much!”
Let’s take a closer look. What are Tax Deductions?
Tax deductions are expenses or contributions that taxpayers can subtract from their gross income that reduces the amount of income subject to taxation. Here are common Tax Deductions.
Standard Deduction: The standard deduction is a fixed amount that taxpayers can claim. It provides a simplified option for reducing taxable income and is adjusted annually for inflation. For 2023, the standard deduction is $13,850 for individuals, $27,700 for joint filers, or $20,800 for heads of household.
Itemized Deductions: Itemizing deductions lists specific expenses; taxpayers should compare the benefits of itemizing versus taking the standard deduction to determine the most advantageous approach.
Are you sure about that?
Do you know about these 10 Tax Deductions:
1. Personal Appearance: Yup. For Actors, Performers, and Entertainers this is a Real thing. Take into consideration the costs of makeup, hair maintenance, airbrushing, refined grooming, wardrobe/clothing “as-a-costume”, etc - any form of expense that was used to fit a specific role can and should be deducted. Note: You must be tracking this and be able to show proof of the expense…but, go for it!
2. Graphic Design - that Canva, Adobe Lightroom, Photoshop software, those Kinkos faxes and Staples printouts are all there to help promote your business, create logos, flyers, presentations etc. therefore they are to be considered deductible expenses.
3. Shows - That’s right. Performances are considered promotional because it advances your business and brand in the form of advertisement this includes the refreshments, decor and other enhancements being used to promote the show.
- SAVING UP? Goal Setting? Here's some help...
4. Snacks - You bet. In the world of taxation there is a term known as “ordinary and necessary” In general, ordinary expenses refers to those that are commonly and typically used by people in your trade or industry. Necessary expenses refers to those expenses that are helpful and appropriate. Snacks are a valuable contribution to a creative environment especially for non-profit businesses, after-school programs, art studios etc. that host frequent workshops, events and community gatherings. Whether it is an incentive for your staff or a thoughtful gesture for the public this can easily be deemed necessary and you can actually deduct the cost of Snacks under “Office Supplies”.
5. Mileage Allowance - Do you have a car? Are you driving it to work, auditions, seminars, meetings, gatherings etc.? Then you can deduct what is known as a Standard Mileage Allowance from the expenses you’ve incurred. It's up to you how much work you want to put into claiming this deduction. Eitherway, you have to keep an eye on your vehicle's odometer and keep a precise log of all miles in a “log book”. For the 2023 tax year: The deduction for business use is 65.5 cents per mile; for medical purposes is 22 cents per mile, and for charitable purposes stays at 14 cents per mile.
6. Lodging - this is an old school way of saying Hotel, Guesthouse, Airbnb etc.
7. Legal Fees - this typically falls under “Legal and Professional Services” including filing fees, paralegal fees, etc. [note: Start-Up Costs are different; not applicable here]
8. Greeting Cards - Are you a thoughtful and personable giver? Then you might be giving out things like: Thank You Cards, Swag Bags, Trinkets and Take- Away items from places like Target, Amazon, Dollar Store, Vendors etc. These are all deductible expenses.
9. Donations - If your donation results in favorable publicity for the business, and therefore a likelihood of increased sales, many businesses deduct them as a promotional expense (not as a charitable donation). So although it comes from the heart - the possibility of an impending return qualifies it as “Advertising”.
10. Membership Fees - Guilds, Associations, Coalitions, Societies, Organizations, Clubs etc. all require a set of dues in most cases - you can and should deduct them under “Other Expenses”.
Whew!!! That’s just a start, to maximize tax savings through deductions, consider the following:
Stay Organized: Keep thorough records of deductible expenses, receipts, and documentation to support deduction claims during tax filing.
Download an App - like Smart Receipts to track your Receipts today!
https://smartreceipts.co/
Plan Ahead: Anticipate major expenses and contributions throughout the year to strategically time deductions for maximum benefit.
Explore Tax-Advantaged Accounts: Contribute to retirement accounts, HSAs, and other tax-advantaged savings vehicles to lower taxable income while simultaneously building financial security.
Consult a Tax Professional: Seek guidance from a qualified tax professional or utilize tax preparation software to ensure compliance with tax laws and identify all eligible deductions.
Don’t Doubt Yourself!
There is more to you spending and deductible tax options than you think!!!
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