Tax Issues and Decutions for the Production of Sound Recordings
Planning your taxes when recording music (sound recording) is likely not a priority. It is, however, a good idea. Musicians are increasingly recording their own music and money is often an issue. With that in mind, here are 10 tax issues and deductible expenses you should know when recording your own music. (These tax issues and deductions may also apply to other creative endeavors like film-making)
1. Costs for producing “sound recordings” typically must be written off over a period of years (“Capitalized”).
The IRS mandates that costs associated with the creation and production of sound recordings are written off over a period of years. This means that you cannot deduct the entire amount of a sound mixer, for example, in the year you buy it. Rather, that cost must be spread out over a number of years. The production of sound recordings, motion picture films, and video tapes are specific examples of “tangible personal property” that cannot be deducted entirely in the year of purchase or cost.
The exact method of accounting for these costs is extraordinarily complex and is best left to a tax professional when filing your taxes. The following, however, are prime examples of purchases and costs you should keep track so that your tax professional can maximize your tax savings.
2. Home Studio/Office Expenses
You obviously need a location for where the recording will occur. This is where expenses for a home studio or off-site studio come into play. Whether you’re stocking and preparing the home studio for a great musical environment, or renting a studio outside the home, these costs are part of the expense in producing a sound recording. If it’s from home, you may also be able to write off part of housing expenses like rent, internet, and electricity.
3. Equipment Expenses
Need to buy a laptop to create your masterpiece? This is an equipment expense for the production of sound recording. Other examples include speakers, sound systems, printers, audio systems, amplifiers, recorders. If it’s necessary for creation of the sound recording, make sure to keep track of it.
4. Software/Program Expenses
There are may pricey music programs out there make it easier to produce music (or just are simply necessary). Don’t forget to keep track of your purchase of these programs and software.
5. Instrument Expenses
This can include common examples like guitars, drums, and keyboards that put the sound in your sound recording. It can also include associated musical supplies, like picks, drum sticks, strings, as well costs in repairing and upkeep of the instruments.
6. Promotional Expenses
This is one of the categories of expenses normally associated with music production that it’s possible to deduct in the same year. The costs with connecting an audience to your sound recording fall into the realm and can include: business cards, professional photos, CD’s, DVD’s, videos, website development and hosting, or advertisement.
7. Educational Expenses
Educational expenses cover things like: voice training, purchase of musical arrangements, music downloads and CD’s, musical publications, sheet music, or other types of coaching and lessons
8. Travel Expenses
Need to travel as part of your music production? Don’t forget to keep track of those costs and and expenses
9. Professional Expenses
Legal and accounting services may be an afterthought for smaller scale music production. It also may be necessary if you want to reap the financial and artistic rewards from your creations. Other professional expenses can include costs to be part of a musical association or trade group, as well as licensing and copyright services.
10. Labor Expenses
If you need others to help you in your creation (and not good friends working for free), the cost of this “labor” is a tax write off. Just make sure that you keep records of your payments. These labor costs cover not only the technical aspects of the sound recording production, but musicians and singers.
Ari Good, JD LLM, is an experienced Miami entertainment lawyer and aspiring musician himself who represents DJs, live musicians, fashion models, and other entertainers in copyright, licensing, and contract matters. For a free and confidential consultation to discuss your legal rights, contact Ari of Good Attorneys at Law, P.A., in Miami-Dade County at (239) 216-4106 or toll free at (877) 771-1131 or by email to firstname.lastname@example.org. Visit goodattorneysatlaw.com for more information.
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