This. Coolhandjjl is correct. I'm a tax accountant, and way better at that than playing bass.
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2018 Tax code: no write offs?
- Thread starter BassAndReeds
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- 2018
This. Coolhandjjl is correct. I'm a tax accountant, and way better at that than playing bass.
Not when you file a joint return. You either have to itemize or standard deduct...cant do both...No, no, no, no no.
The standard/itemized deduction has NOTHING to do with business expenses, which are all done on schedule C. You deduct business expenses from your business gross income to arrive at your business net profit. The standard or itemized deduction is completely unrelated, and happens later in the process.
I repeat, nothing, whatever, to do with deductions related to a business.
I am a CPA by day and there are a few changes that will impact a Schedule C filer but none really adverse. (A one Member LLC files as a Schedule C.)
You will be able to deduct all of the cost of equipment purchases in the year put in service. For most of us that is not a change as previously you could claim a Sec. 179 deduction up to your income. Now the "expensing" is actually Bonus Depreciation and not subject to the income limitation. You can elect out of this if you want.
Income from a Schedule C. Will now be taxed at lower rates like other business income. Except the rates are actually the same but you get a deduction for part of your Qualified Business Income that makes your effective rate lower. Musician(and other Personal Services) face an income limitation on this so if your income (from all sources) is quite high you lose this deduction.
There are a lot of other changes in the law but these two will have the biggest impact on Musicians. Contrary to what they said, there was exactly ze ro "simplification" in the bill.
You will be able to deduct all of the cost of equipment purchases in the year put in service. For most of us that is not a change as previously you could claim a Sec. 179 deduction up to your income. Now the "expensing" is actually Bonus Depreciation and not subject to the income limitation. You can elect out of this if you want.
Income from a Schedule C. Will now be taxed at lower rates like other business income. Except the rates are actually the same but you get a deduction for part of your Qualified Business Income that makes your effective rate lower. Musician(and other Personal Services) face an income limitation on this so if your income (from all sources) is quite high you lose this deduction.
There are a lot of other changes in the law but these two will have the biggest impact on Musicians. Contrary to what they said, there was exactly ze ro "simplification" in the bill.
You don’t need to form an LLC to claim business related expense deductions. But you do need to be operating as a bona fide business. And what you need to do (and not do) to be considered one (as opposed to having a hobby) can get a little complicated depending on your individual situation. But basically you have to make enough money from your business activity that you’re not perpetually operating at a loss. So if you don’t periodically end up having some taxable income after expenses, the tax people aren’t going to be too keen on allowing you to continue claiming “business” expenses.
The IRS has some well done publications free for the download that will explain the details. Publication 334 is a must read for anybody filing Schedule C. The IRS has a list of recommended additional reading for small businesses. Find it here.
Best bet is to do some reading so you’re not totally clueless and know what questions to ask. Then consult a tax professional. It’s not very expensive. And it’s money well spent.
The IRS has some well done publications free for the download that will explain the details. Publication 334 is a must read for anybody filing Schedule C. The IRS has a list of recommended additional reading for small businesses. Find it here.
Best bet is to do some reading so you’re not totally clueless and know what questions to ask. Then consult a tax professional. It’s not very expensive. And it’s money well spent.
The point is things are different going forward. They passed sweeping tax reform last year and it impacts us. I am also going to ask my CPA about changes to pass-through income. Some of these changes are challenges, some are boons. Dang if I know which are which!
I may be wrong here, but FWIW...
I make about 20-35k a year playing music. It is almost all 1099 income, and is my "side" job, as I have a full time job that is separate. I looked into setting up an LLC with my lawyer after my divorce, because that income has a big impact on the child support I would pay.
While resesrching, I quickly concluded that it wouild not be worth it, for these reasons:
Good luck getting any entity that pays you for gigs to make the check out to "timmy-watts musical services, LLC." Won't happen. Secondly, you have to be able to easily show that the business is substantially different and separste than timmy-watts, the person. I cannot really say that. Third, corporate tax hits hard on the business, and essentially more than doubles what I would pay as just side income. Then, You have to be insured a certain way, more red tape, blah blah... Then they will turn around and tax the income you take as a salary from your business.
It would add up to more than the potential difference in child support I may have in the future, from what I could find out in my case.
I will also look into the 2018 tax laws. If you cannot write off as much, I just won't buy as much. I'll be much more choosy. Simple economics.
I make about 20-35k a year playing music. It is almost all 1099 income, and is my "side" job, as I have a full time job that is separate. I looked into setting up an LLC with my lawyer after my divorce, because that income has a big impact on the child support I would pay.
While resesrching, I quickly concluded that it wouild not be worth it, for these reasons:
Good luck getting any entity that pays you for gigs to make the check out to "timmy-watts musical services, LLC." Won't happen. Secondly, you have to be able to easily show that the business is substantially different and separste than timmy-watts, the person. I cannot really say that. Third, corporate tax hits hard on the business, and essentially more than doubles what I would pay as just side income. Then, You have to be insured a certain way, more red tape, blah blah... Then they will turn around and tax the income you take as a salary from your business.
It would add up to more than the potential difference in child support I may have in the future, from what I could find out in my case.
I will also look into the 2018 tax laws. If you cannot write off as much, I just won't buy as much. I'll be much more choosy. Simple economics.
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Give and take... and boy, do they know how to take. Don't forget insurance on the equipment, either... they want their cut, too...
... ugh, you can't win... lends a whole new meaning to the phrase, 'I'd do it for free'...
... wait a sec...
What you do behind closed doors is none of the IRS's business...
I just had mine done by H&R Block. The lady really knew her stuff. Saved me about $4.8K! She also said there will be a LOT of changes for'18: rates, deductions, capital gains, etcetera. I don't gig much anymore, so music income I can't address. She did run my '18 theoretical taxes, based on the new tax laws, assuming our income was exactly the same. We would get back $500 LESS this year! Thanks a bunch Congress. I think the challenges are for the average Joe, and the boons for the wealthy donor class. Rant over. Moral of the story, if in any doubt, seek expert advice! Every time I have, it's been a great investment!
Ok- for the 3rd time if you have a HOME BUSINESS--- such as your wife working as a independent contractor and you have a full time W2 job---you file a joint return--- are you with me so far??I repeat, nothing, whatever, to do with deductions related to a business.
On that joint return you can write off your Home Business expenses, but ONLY if you itemize all your deductions. Ok so far?
If you itemize you can't take the standard deduction. Trump is doubling the standard deduction in the hopes that you WON't itemize. therefore it does have something to do with a home business. (WHich most part time bass schlubs would be anyhow, as they are not making their main income off it)
Well, this depends. Who is the home office used by? If it is by your wife then she can claim the home office on Schedule C against her self-employment income. Not as an Itemized Deduction on Schedule A. If it is for you (full time W-2 job), then it is much harder for a W-2 employee to claim home office and if you do it would be as an Un-reimbursed Employee Expense claimed as an Itemized Deduction on Schedule A and also is subject to a limit of the amount above 2% of AGI.
jdthebassman
play to live live to play
I recommend HR block they are up on all the changes and will do a comparison to this years taxes and the change next year. I am a full time working musician and write off a lot of gear. according to my tax lady the only change for me was you cant write any thing off if you get a W-2 I do a church mass once a week (yes I get paid to go to church LOL) and get w-2 no longer can I write off the mileage,
bummer. 1099 nothing changed you can still write off everything and I fell in to a lower rate the 10% bracket and after the comparison next year it should be a few hundred more.
bummer. 1099 nothing changed you can still write off everything and I fell in to a lower rate the 10% bracket and after the comparison next year it should be a few hundred more.
Exactly... So if i can do her schedule c business expense deductions and take the bigger trump deduction...happy days
Been doing my own taxes forever but using software and discussing with tax folks I know. Day job is engineering including budgeting/etc so comprehension of math, software, tax regs is required. Came across the item below this week and thought of the eBay music gear tax forms folks got.....
"Depreciation is a tax concept that has nothing to do with real value.
However, it has tax consequences if and when you sell or gift the instrument.
As of now, your cost basis is the purchase price. If you sell the instrument for more than the basis, the difference will be long term capital gains income.
If you take depreciation, that reduces your cost basis by the amount of depreciation. So after 7 years under standard depreciation, or after 1 year under section 179, your cost basis is zero. When you sell the instrument after complete depreciation(write-off), the entire sales proceeds are capital gains subject to tax."
Invalid Link Removed
Questions:
Is it better to depreciate or 179 write-off now and take the capital gains hit later when gear is sold?
OR
Is it better to not write it off(get taxed for the cost $$$ at current lowered rates) and sell it whenever you want with zero or much less capital gains tax?
This one is puzzling me. I normally only deduct vehicle expenses and depreciate gear that normally rapidly depreciates that I probably will never sell(electronics that will crater prior to me wanting to sell it). The above questions are more in play with current lowered rates AND the fact that rates ALWAYS go up. They've gone down a couple of times in my 44 years of working, a rare event.
I've run those questions by a couple of financial folks and waiting for their replies which I will post here. Any input will be useful.
"Depreciation is a tax concept that has nothing to do with real value.
However, it has tax consequences if and when you sell or gift the instrument.
As of now, your cost basis is the purchase price. If you sell the instrument for more than the basis, the difference will be long term capital gains income.
If you take depreciation, that reduces your cost basis by the amount of depreciation. So after 7 years under standard depreciation, or after 1 year under section 179, your cost basis is zero. When you sell the instrument after complete depreciation(write-off), the entire sales proceeds are capital gains subject to tax."
Invalid Link Removed
Questions:
Is it better to depreciate or 179 write-off now and take the capital gains hit later when gear is sold?
OR
Is it better to not write it off(get taxed for the cost $$$ at current lowered rates) and sell it whenever you want with zero or much less capital gains tax?
This one is puzzling me. I normally only deduct vehicle expenses and depreciate gear that normally rapidly depreciates that I probably will never sell(electronics that will crater prior to me wanting to sell it). The above questions are more in play with current lowered rates AND the fact that rates ALWAYS go up. They've gone down a couple of times in my 44 years of working, a rare event.
I've run those questions by a couple of financial folks and waiting for their replies which I will post here. Any input will be useful.
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Well, for one thing, long-term capital gains rates have not been moving much, and have been moving down (long-term), and are significantly below income tax rate for the same filer, all the way down to 0 for those in the 10-15% bracket since 2008 But I, for one, have not had occasion to dip into the mess that is depreciation, given the nature and scale of my business venture(s) (or lack thereof, some years.)
(see "summary of recent history" in this article )
Capital gains tax in the United States - Wikipedia
(see "summary of recent history" in this article )
Capital gains tax in the United States - Wikipedia
