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Tax deduction on your gear?
- Thread starter NickInMesa
- Start date
Well, according to page 38 of this document: http://www.irs.gov/pub/irs-pdf/p946.pdf, it appears to be 7 years. I didn't find musical equipment in any specific class so I'm assuming this is correct? It also doesn't mention anything about the property being new, so I'm also assuming that I can use the price paid as the cost basis?
In order to claim any deductions, you HAVE to report the income. And even if you don't claim the deductions and call it a hobby, you're still required to report the income. Keep very very good records. When I was gigging all the time (I haven't played for pay in five years), I had an Excel spreadsheet that I logged each gig (date, location, band, miles, hours, and pay) as well as expenses with columns for different categories such as equipment, repairs, publicity, education (books, magazines, recordings, etc.), T&E, etc. Keep hard copies of receipts for every expense you log into the sheet.
If you run the business side as a business, then you shouldn't have any problems. And you don't have to depreciate the gear, you can run the business on a cash basis and take the entire cost as a deduction the year you buy it. Of course that also means you need to record the proceeds of any equipment sales as revenue in the correct year as well.
This is one area where a good tax specialist who is familiar with entertainment business can be an asset. H&R Block isn't what I'm talking about either.
John
If you run the business side as a business, then you shouldn't have any problems. And you don't have to depreciate the gear, you can run the business on a cash basis and take the entire cost as a deduction the year you buy it. Of course that also means you need to record the proceeds of any equipment sales as revenue in the correct year as well.
This is one area where a good tax specialist who is familiar with entertainment business can be an asset. H&R Block isn't what I'm talking about either.
John
