Performing Artist Tax Deductions: Are You Aware of These Tax Deductions for Actors and Entertainers?
As a performing artist, there are quite a few federal and California tax deductions you may not know about. Whether you’re an actor or actress, dancer, musician, a model, or a comedian, learning about commonly missed tax deductions can help you to save some serious money and be prepared for tax season.
Self-Employed vs Employee Filing
If you’re classified as an employee, you may receive a Form W-2 Wage and Tax Statement. If you’re working as a self-employed freelancer, you may be required to report your income on a Form 1099-MISC Miscellaneous Income and pay self-employment tax on a Schedule C Profit or Loss from Business.
These federal and California tax deductions should apply to both, but be sure to check with a qualified CPA to be sure. A good accountant can help you maximize your deductions so you can pay less. This is especially helpful for freelancers, as your income taxes aren’t deducted by your employer. Here are some of the tax deductions you should pay attention to throughout the year.
You can deduct some auto travel expenses, but not all of them. You can deduct business miles whenever you’re traveling between business locations, so be sure to save those receipts. However, the miles you travel commuting from your home to a regular business location are not deductible.
Here’s how to document your qualifying business travels so you can reap the benefits of federal and California tax deductions related to auto travel:
- Write down the date and reason for the trip
- Write down the origin and destination of the trip, as well as the mileage
- Write down (or photograph) your vehicle’s odometer reading at the beginning and end of the year
- Save receipts for all expenses such as maintenance, repairs, and insurance, as well as any reimbursements you receive from your employer
As long as you weren’t reimbursed for out-of-town travel expenses by your employer, you may deduct expenses related to travel such as hotels, transportation, gratuities, and even services such as valet and laundry. In order to qualify for these federal and California tax deductions, you have to travel away from home, which usually means away from the city where your business is located.
Here’s how to document your out-of-town travel expenses so you can qualify for these commonly missed tax deductions:
- Write down the date, destination, and purpose of your trip
- If you drove, document the mileage
- Write down and save receipts for all of your expenses over $75 (keep meals and lodging separate)
Have you taken any classes or gone to school so you can boost your career? Relevant continuing education may be eligible for federal and California tax deductions. Your education qualifies if your employer required it in order for you to maintain your position or the same pay rate, or if the education helps you improve in your career.
You’re not eligible to deduct education if your goal is to start a new business or trade or if the courses are necessary in order for you to meet the minimum requirements of a position. If you’re not sure if your education qualifies, talk to a CPA. An accountant can help you choose the right courses, or they can help you discover if there’s any way for your existing education to qualify.
While deducting phone expenses may not be the most profitable of all of the federal and California tax deductions, every bit helps, and you may be surprised how much those costs add up over the course of a year.
Your first home line isn’t deductible, but you can deduct business-related toll calls from that line. A second line reserved strictly for business use is deductible. If you use your cell phone for business and personal calls, mark down the business calls on your bill every month so you can deduct them.
You may be able to deduct your tools of the trade if they’re necessary to perform. For example, if you’re a professional guitarist, you may be able to deduct your guitar, as well as your amplifier, effects pedals, and any other cables, cases, and accessories. Because this type of gear is often used for pleasure and work, they’re some of the most commonly missed tax deductions.
To ensure that you’re prepared for federal and California tax deductions, save your receipts and document equipment costs separately from your everyday expenses, as they’re listed separately on your tax reporting form.
In addition to the cost of your essential equipment, you can deduct the cost to keep them in working order. For example, if you’re a clown, you can deduct the cost to have your clown suit dry cleaned if it gets dirty during a performance. Or, if you’re an actress with a costume that doesn’t fit properly, you can deduct the cost of alterations.
Beauty Aids and Physical Enhancements
If your physical appearance is part of your job, you may be eligible for federal and California tax deductions. For example, if you’re a model, you can deduct the cost of makeup. The beauty aids you deduct must be used directly in your work, such as modeling gigs, live performances, promotional appearances, and other events where you’re required to have a certain look.
Besides appearance-enhancing items such as makeup or costumes, you may be able to deduct the cost of working on your physical appearance. For example, if you regularly work with a personal trainer to gain strength for an upcoming role, you could deduct those expenses. Or, if you need to get a haircut to maintain an image, you could deduct that.
As usual, the expenses have to be directly related to work to qualify for federal and California tax deductions.
One of the more commonly missed tax deductions is your promotional materials. Are you an actor who needs headshots to land a role? You can deduct the cost. Like equipment, your promotional materials are reported separately on your tax form, so be sure to document them separately.
Here are some of the most common promotional items that may be deducted:
- Business Cards
- Music Demos
- Audition Tapes
- Publicity Photos
In addition to promotional materials, you can deduct expenses occurred when looking for new jobs in your field of entertainment — even if you don’t actually land the gig. In order to be eligible for federal and California tax deductions related to job-seeking expenses that occur out of town, the sole purpose of your trip must be pursuing work, not personal leisure.
In some cases, you may be able to deduct the cost of home office supplies, as long as you regularly work from that part of your home. For example, a new couch and TV for your living room probably wouldn’t qualify, but a work desk and chair would be eligible. You may even be able to write off a computer if it’s used specifically for working at home.
There are plenty of other little work-related things that you may pay for out-of-pocket that qualify for federal and California tax deductions. Did you buy a gift for your boss’ birthday? Did you subscribe to a relevant business journal? Do you have to pay union dues or obtain a license? Throughout the year, be aware of your spending, and save all of your receipts. Those costs add up.
A CPA Saves You Money
Many entertainers overlook these commonly missed tax deductions, but that’s not the only reason they’re losing money. All too often, performers try to navigate their taxes on their own, and while they may save some money, they’re rarely reaching the full potential available to them. That’s where a good CPA comes in.
A good accountant is an investment that pays for itself many times over. Beyond just ensuring that you’re taking advantage of all of the federal and California tax deductions, your CPA can help you with everything from reinvesting your earnings to managing your finances.
Having a trusted, qualified accountant on your team makes a world of difference in helping you to be more profitable while also preventing financial errors that can have lasting consequences.
Call Shahen Derderian & Associates Now
If you’re an entertainer, we encourage you to give us a call to arrange a consultation. We’ll be happy to explain exactly how we can help you to increase your bottom line so you can focus on doing what you do best — performing. Contact Shahen Derderian & Associates today, and reap the incredible financial benefits that these federal and California tax deductions have to offer.