by Amy Smith for The Dance Journal
This column in the Dance Journal seeks to improve the financial literacy of dancers and artists in all creative disciplines, so that they may develop sustainable practices and further expand the reach of their creativity. Questions for Amy may be mailed to email@example.com for consideration.
So as a dancer I often have to buy music, go to performances to do research, take classes, attend seminars, etc. Are these items deductible? And will declaring these run me the risk of an audit? I was told the IRS is suspicious of this sort of thing?
Dear Deductions Deducter,
Yes, all of it is deductible. The IRS defines appropriate business deductions for self-employed people as those things which are “ordinary and necessary” to your line of work. Their actual language is “An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business.” So all of the things you mentioned (and more!) would fit into that description, and PLEASE don’t let fear of audit stop you from deducting legitimate business expenses. Your chances of audit are tiny, and your best defense against an audit is simply to keep good records. But the most important thing to remember is that the IRS wants you to deduct your business expenses. Seriously, do it.
So in my house, I have set up a room as a mini-dance studio – wood floor, barre, mirror, etc. so that I can practice and work on choreography. Is this space then considered a home office that can be deducted on my taxes? How do I calculate the amount of the deduction?
Dear Home Studio,
Lucky you! Your studio sounds nice – can I come over and do tendus with you sometime? Yes, your home studio is a deduction (see above) and you would fill out form 8829 as would anyone with a home office and/or studio. The IRS made form 8829 even simpler this year. But basically all you need to know is an estimate of the square footage of your studio, the square footage of your entire home, and what you paid total in rent and utilities, which are considered “indirect” expenses, so you get to deduct a percentage of the costs. In addition, whatever you spent on barres, mirrors, etc. is considered a “direct” expense and you should claim the whole thing. Now get off your computer and go do some leg swings!
Can you explain the difference between depreciation vs. deduction. What should I be depreciating vs just deducting?
Depreciation is the term we use in accounting for taking into account the fact that “property” (meaning a house, car, or other thing that will last for a long time) loses value over time. So when you own a rental property, you get to deduct depreciation as an expense every year, even though there was no hard cost to you. I imagine you might also be talking about things like computers and sound equipment, which are also known as “amortizable” expenses. For items like a new laptop you purchased for work, the IRS will allow you to take the entire expense in the year you incurred it, or to spread it out over the useful life (5 years for a computer) of the thing. Which you choose will depend on some other factors, like how many other deductions you have that year, so put that item in last and test some scenarios in your tax software before deciding.
As a dancer, I use my car quite a bit to go to rehearsals, classes, performances, etc. Can I use automobile expenses as a deduction? If so, do I do the standard mileage deduction or just a direct write off to expenses? What records do I need to keep for either method?
Dear Gas Guzzler,
Yes, me too! In more that 10 years of doing tax prep, I have never known anyone who used the direct expense deduction for their car. The standard mileage deduction is much simpler, and therefore much better. The IRS would love for you to keep a notebook in your glove compartment, but who does that? Really, you should just do what I do which is write down “Lantern show 70 miles RT x 40 trips = 2800” etc. on your business deductions worksheet. Estimating is fine if it’s based in reality. And don’t forget to add parking and tolls (again, fine to estimate!) to your deduction. When crossing the Walt Whitman bridge, I often think of his fine quote “resist much, obey little”. But I don’t think he was talking about the IRS…
What software to you recommend for doing my taxes? I use quickbooks, so is there something that works well or integrates with it?
I love Quickbooks. Really I do, it’s an awesome piece of software. I used to use Turbo Tax to do my own tax prep, but now I use the tax pro version, called ProSeries. But I still love Turbo Tax. I think it’s about $90 to buy the version that lets you file Schedule C, but it’s worth every penny in ease of use. And you can write off that $90 next year! I haven’t tried importing expenses directly from QB into TT, but I bet it’s possible because they are made by the same company. I’ve also tried Tax Slayer and Tax Act and I gotta say they are pretty clunky with Schedule C. Much cheaper, but if you spend 3 extra hours doing your taxes, it’s no longer worth it. So please buy Turbo Tax and let me know how it goes!
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