Instruments, gear, and musical equipment are generally considered capital expenditures. Capital expenditure simply means that you pay for the items in full, upfront, and use them over an extended period of time, versus expenses like rented studio space or fuel, which are regular, ongoing costs.
You're generally not permitted to claim the full value of an asset as a business expense if you plan to use it in your business for longer than one tax period. Instead, you must depreciate it over several years. Depreciation is the process of expensing the value of your equipment over several years based on its useful life and end value.
While it may seem disappointing not to be able to deduct the entire capital expense in the year of the purchase, this can have benefits down the line. As your music career grows, hopefully, your profitability does too and depreciation can lower your taxable income in those more profitable years.
For those in the music business, attending concerts, festivals, and other music events is a deductible business expense. Sure they are fun, but you are also learning. You're keeping up with musical trends, gaining inspiration for your own stage presence, and networking. A great tip to get the most out of these experiences is to bring business cards that you can exchange with other musicians or music industry professionals you meet.
Any parking expenses or the cost to travel to and from music events are also tax deductible.
Whether you work from home or are renting practice and recording space, the costs associated with that workspace are tax-deductible. If you pay booking fees for recording studios or rent a rehearsal space those payments would be your office expenses.
If you're using a dedicated space in your house exclusively for your musical business, then your deduction would be through the home-based business deduction. This space could include a studio, practice room, storage, teaching, or the place where you do your bookkeeping, accounting, etc.
The home office deduction formula is based on the square footage of your workspace versus the total square footage of the home. So if you rent a $1000 apartment that is 1000 square feet and your workspace is 150 square feet, then the deductible portion would be 15% of $1000 ($150). The same formula applies whether you rent, pay a mortgage, or other home-related expenses.
We use the same formula to calculate utilities. If your monthly wifi bill is $49 for the same apartment then 15% of that bill is $7.35 and that can be deducted as a business expense. The same formula applies to other relevant utilities and they can be written off as deductible work-related expenses.
When you are traveling for business, then that is a business expense. It is important to note that business travel deductions are only available when you travel away from your tax home or primary business area. You also have to be traveling for significantly longer than an ordinary day's work and have a need for sleep or rest while away. If you meet these criteria, you can deduct the cost of travel, whether it be airfare, lodging, transportation, or mileage.
For example: if you live in Houston and are playing a show in Houston, that is not considered business travel. But if you live in Houston and are going to Austin to perform that could be considered business travel.
Meals are a tricky category when it comes to tax deductions as there are common situations without black-and-white solutions. Generally, "reimbursed non-entertainment-related meal expenses" are deductible. The same rules as travel apply: your gig has to be overnight or long enough that you need to stop for sleep or rest to properly perform in order for meals to be deductible. If you eat breakfast at home before going to a show down the block, you can't deduct those expenses. If you stop for lunch between stops on a multi-day tour, that is a business meal.
You can figure out all your travel meal expenses using either of the following methods:
How does this play out in practice? As with most of these tax guidelines, common sense is important. Deductions make sense for day-of-show food while on tour but not for your normal trips to the grocery store when at home.
These expenses include things like a Canva Pro subscription, web hosting fees, and professional services like web design and development. If you are running ads on social media, this is a deductible marketing expense.
If you record music in addition to performing live, then the costs associated with recording and producing music are tax deductible.
If you are a member of a trade association like ASCAP, Country Music Association, or others, your membership fees are tax deductible. Similarly, fees for and travel to conferences are tax deductible. If you take singing lessons or any other continuing education, those education expenses are tax deductible.
Many expenses get their own line on your tax filing, but some will not fit those boxes and get categorized as "other expenses." To qualify, these expenses should be common and necessary.
Common means generally accepted as typical for your trade or business. Guitar strings would be an easily defensible common expense. A chainsaw, on the other hand, would not be a common expense for musicians.
A necessary expense is, well, you guessed it, needed to operate your business. Again, guitar strings are necessary (if you're a guitar player or have one in your band).
So any time you are unsure of what can be considered a business expense, you can ask yourself is this ordinary? Are other professional musicians/bands/performers spending money on this? And is it necessary? Do I need this to do my job?
Another key thing to keep in mind is tracking your expenses and saving business receipts for at least three years after filing your tax return. You can save these digitally or on paper. Simply taking a photo of every receipt and putting it in Google Drive is sufficient. If you get audited, you will need this proof to justify your expenses.
When you claim something as a tax deduction, you need to keep records that reflect the amount of the deductible expense and prove it was a business expense. While you don't include this proof on your tax returns, it is important to have it available if you ever get audited by the IRS.
Meals are a good one to build a habit around if you are marking them as a deduction for your music business. Take a photo of the receipt and make a note of who you talked to and what business topics you discussed during the meal.
Personal expenses cannot be deducted. For example, if you are traveling and forget toothpaste, you'll need to cover that yourself: personal hygiene expenses are considered personal items and therefore cannot be deducted.
Political contributions, illegal activities, and gifts over $25 are also not tax-deductible.
At the end of the day, Uncle Sam will find a way to get his cut of your revenue whether your taxes are done properly or not. The point of understanding deductions is to minimize the amount that you legally owe. Keep accurate records of every penny that comes into your pocket, build habits around some of these easy accounting processes, and don't let taxes discourage you from doing what you love.
Disclaimer: We have done our best to ensure the accuracy of the information in this and all other blog posts on our website. Our posts are meant to help educate and do not constitute legal, financial, or tax advice.
Want behind-the-scenes info on Green Room’s news and product updates?
Dive into everything taxes for musicians. From tracking income to expense to deductions, we talk about it all in the ultimate guide to taxes for musicians.