Musician's tax question

[Monte]

I have a few specific questions related to reporting gig income. This year I will have made around $7-10k
off of gig money; I've been doing it for the fun of it
and experience, but this means that it will be my first time to
file taxes on it. I'm trying to figure if I need to save any back for the tax man, so:

1) Is all of the equipment you use on gigs deductible the first year you claim income, even if it wasn't bought during the
last calendar year? If so, do I claim the $3400 I paid for my
Juzek in '96, or the $7000 on my appraisal? What kind of
documentation do I need for all of it? Are hand-written
receipts enough, like when I bought a set of Velvet strings off
of a 2xbsslistmember?
2) I know I can claim mileage to rehearsals and gigs, fees for parking at downtown gigs, etc. What else can I claim?
Can I claim the insurance I have for my instruments and
equipment?

Any other thoughts for this amateur would be appreciated.

Monte

[dhosek]

I'm not a tax accountant, so I could be completely off base on this:

To deduct the cost of equipment in previous years, you would have to have started depreciating it on your returns from the year you bought it.

With some limitations, you can deduct 100% up front without depreciating (I think there's a cap of about $10,000 or so, it's been a long time since I've filed a schedule C).

You deduct the actual purchase price, not the appraisal price.

You can deduct insurance, fees etc. immediately.

It's a good thing to at least show some small income from year to year just to keep the IRS happy.

Handwritten receipts are fine for record keeping. Also valid are cancelled checks and the line items on your credit card statements.

-dh

[rablack]

Talk to your accountant. Don't have one? Better get one. You probably have to do quarterly filings on your income as a self employed musician to avoid penalty (although at that dollar level the penalties for not doing quarterly filing won't be too big). There's bound to be a way to start taking depreciation on your bass - talk to your accountant.

[brianrost]

Originally posted by Monte
[B1) Is all of the equipment you use on gigs deductible the first year you claim income, even if it wasn't bought during the
last calendar year? If so, do I claim the $3400 I paid for my
Juzek in '96, or the $7000 on my appraisal? What kind of
documentation do I need for all of it? Are hand-written
receipts enough, like when I bought a set of Velvet strings off
of a 2xbsslistmember?
2) I know I can claim mileage to rehearsals and gigs, fees for parking at downtown gigs, etc. What else can I claim?
Can I claim the insurance I have for my instruments and
equipment? [/b]

For the most correct answer, see an accountant. From my personal experience (what my accountant has me write off):

1. You can deduct equipment prior to this year if this is the first year you are claiming. You probably should do a long-term depreciation (5 or 10 years) rather than take 100% the first year if it is a really large amount. Check with your accountant to see about anything work more now than when you bought it. Once the gear depreciates to ZERO, if you sell it you must claim that as a PROFIT since in the eyes of the IRS your stuff was worthless when you sold it! You need receipts for all your purchases, a hand written bill of sale is OK.

2. You can claim repairs, lessons, supplies (sheet music, books, recordings, blank tapes or CDs, batteries, light bulbs for your music stand, etc.), laundry (of band clothes, that is), insurance and any other costs of doing business that you can document. Keep a mileage log book; you don't need receipts for tolls or parking, just log them.

[Don Higdon]

Aside from you blabbing about it here, who else knows how much you made?

[Monte]

Originally posted by Don Higdon
Aside from you blabbing about it here, who else knows how much you made?

Good point Don! Doh, I meant to say I'll make $7-10 , not $7-10k. Just a typo.... ;-)

Monte