Small studio tax advise please?

infiniteposse · 24th January 2003, 05:36 AM

I hope this is the right place to post this subject...

I'm curious how those of you who work music as a side gig go about writing off your expenditures at the end of the year. I've been writing and releasing music actively for the last 6-7 years and started to write off the gear and space I rent for these pursuits about 3 years ago. My music income has always been below what I make from selling music, but there's always a little cash coming in throughout the year here and there, although in all honesty it's nowhere near what I spend on music related persuits. I consider my studio and music productions a small buisness endeavor outside of the jobbie job that pays the bills, so I write it all off when tax time comes.

My question is when in this situation (operating at a loss for 3+ years), is there a limit to how many years you can operate at a loss and write off the gear and production as a buisness expense? I'm keeping very clean records of what I spend money on and how I make money. I've been going to H&R Block to do this since I started since I was very weary of doing something potentially illegal and they continue to say everythings fine, but this one guy I spoke to last year was unsure about how long you could go on as a bleeding buisness.

Does anyone else have experience in this arena?

Any thoughts greatly appreciated.

Lee

infiniteposse · 24th January 2003, 06:19 PM

Anyone?

Dave Martin · 24th January 2003, 06:30 PM

I assume that since you went with H&R Block that you're in the US - I have to assume that the tax laws are different in other countries.

Essentially, if you're making money with your equipment, you can write it off. A certain amount (which was raised in the last couple of years) can be written off the year it's purchased, while some other stuff may have to be amortized overr a period of a few years. If you want to be aggressive, you can even write of the space where you do your business, as long as that's all that you do there.

If you're making any income (especially traceable income - that is money that goes through a bank account) then you need to declare that income. And therefore, you can take the deductions related to that income.

To answer your immediate quesation, I seem to remember that you can operate a business at a loss for 5 years (7 if you're raising horses) before there are any questions.

But I will say that you need to find an actual accountant who is used to handling tax returns for small businesses (Unless you're in one of the music centers, I doubt that you'll find an accountant who specializes in handling musician's tax returns).

Besides the fact that his fee is deductible, he should save you more money than you pay him, and have the peace of mind that comes with knowing that you can't be busted.

infiniteposse · 24th January 2003, 07:06 PM

Wow. Great thoughts. I'm in SF, CA, so there's bound to be someone around who might be able to help me.

I've been using H&R Block for the C.Y.A. aspects of this, but it's a good idea to see if there's someone else who might specialize.

Thanks for the feedback.

Greatly appreciated.

Lee

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24th January 2003, 05:36 AM	#1
infiniteposse Gear maniac Join Date: Oct 2002 Location: Portland, OR Posts: 294	Small studio tax advise please? I hope this is the right place to post this subject... I'm curious how those of you who work music as a side gig go about writing off your expenditures at the end of the year. I've been writing and releasing music actively for the last 6-7 years and started to write off the gear and space I rent for these pursuits about 3 years ago. My music income has always been below what I make from selling music, but there's always a little cash coming in throughout the year here and there, although in all honesty it's nowhere near what I spend on music related persuits. I consider my studio and music productions a small buisness endeavor outside of the jobbie job that pays the bills, so I write it all off when tax time comes. My question is when in this situation (operating at a loss for 3+ years), is there a limit to how many years you can operate at a loss and write off the gear and production as a buisness expense? I'm keeping very clean records of what I spend money on and how I make money. I've been going to H&R Block to do this since I started since I was very weary of doing something potentially illegal and they continue to say everythings fine, but this one guy I spoke to last year was unsure about how long you could go on as a bleeding buisness. Does anyone else have experience in this arena? Any thoughts greatly appreciated. Lee

24th January 2003, 06:30 PM	#3
Dave Martin Moderator emeritus Join Date: Jun 2002 Location: Nashville, TN Posts: 3,170	I assume that since you went with H&R Block that you're in the US - I have to assume that the tax laws are different in other countries. Essentially, if you're making money with your equipment, you can write it off. A certain amount (which was raised in the last couple of years) can be written off the year it's purchased, while some other stuff may have to be amortized overr a period of a few years. If you want to be aggressive, you can even write of the space where you do your business, as long as that's all that you do there. If you're making any income (especially traceable income - that is money that goes through a bank account) then you need to declare that income. And therefore, you can take the deductions related to that income. To answer your immediate quesation, I seem to remember that you can operate a business at a loss for 5 years (7 if you're raising horses) before there are any questions. But I will say that you need to find an actual accountant who is used to handling tax returns for small businesses (Unless you're in one of the music centers, I doubt that you'll find an accountant who specializes in handling musician's tax returns). Besides the fact that his fee is deductible, he should save you more money than you pay him, and have the peace of mind that comes with knowing that you can't be busted. __________________ Dave Martin Java Jive Studio www.javajivestudio.com Cuppa Joe Records www.cuppajoerecords.com Nashville, TN

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24th January 2003, 06:19 PM	#2
infiniteposse Gear maniac Join Date: Oct 2002 Location: Portland, OR Posts: 294	Anyone?

24th January 2003, 07:06 PM	#4
infiniteposse Gear maniac Join Date: Oct 2002 Location: Portland, OR Posts: 294	Wow. Great thoughts. I'm in SF, CA, so there's bound to be someone around who might be able to help me. I've been using H&R Block for the C.Y.A. aspects of this, but it's a good idea to see if there's someone else who might specialize. Thanks for the feedback. Greatly appreciated. Lee