Deducting musical instrument on tax forms

[Sara Hood]

I was going through the blog posts and reading results from past survey questions. I ran into one that asked about whether forum members in the USA deduct their horns on their tax forms. I did not even know that was possible. So I am writing to re-open the topic and ask some questions about it.

Is it possible to deduct a musical instrument when doing your taxes? How does one do that? Does it apply to any instrument and musician? As I thought about it, I can see how it might be possible. But it seemed to me that only a professional musician could pull it off. A horn and the supplies to keep it running could be seen as a work related expense for a professional. And work related expenses can be deductible under the right circumstances. Or maybe something under the terms of self employment costs, if one does gigs. Am I on the right track?

And a little something for the forum members outside of the USA, if they cared to keep reading this post this far. Is anything like this permissible in countries outside of the USA? If so, what kind of tax breaks might you be able to get as a musician?

I watch with interest to see where this goes. Learning something more, just by being a member of this forum. And loving it!

- Sara

[davewerden]

As far as I know, you could only deduct an instrument (depreciated) if it has some kind of business use, and if you file a Schedule C for your business. So if you do gigs and file a Schedule C, then you should be able to.

[John Morgan]

Dave is correct. I have used the deduction in the past, when I was playing enough and making money from playing. But I sort of lost interest in keeping up with it, so I have discontinued taking the depreciation deduction. I still file a Schedule C every year, however, to cover the income I make from playing.

[Sara Hood]

Now you've done it (tease). You said "depreciation". You may not know it, but my day job is being an Accountant. So I know about depreciation. Now you have me wondering. How long of a "useful life" does the IRS allow for a musical instrument? How long the equipment (read "horn") is expected to last, is an important part of the depreciation calculation. And probably a question that has one answer for tax purposes and another answer in reality.
- Sara

[ann reid]

I’m going to look into purchasing an instrument and claiming it as a medical deduction. I’ll post what I find out.
I’m ready to bet that there are some people who post here who could make a VERY legitimate claim.

[davewerden]

I’m going to look into purchasing an instrument and claiming it as a medical deduction. I’ll post what I find out.
I’m ready to bet that there are some people who post here who could make a VERY legitimate claim.

If you are comfortable answering... Are you thinking of a "comfort animal" type of need, or a physical therapy type of need? Either would be an interesting thing to pursue. Or maybe something else.

Arthur Lehman may have built a foundation (informally) for the latter concept:

http://www.dwerden.com/eu-articles-l...evelopment.cfm

[davewerden]

Now you've done it (tease). You said "depreciation". You may not know it, but my day job is being an Accountant. So I know about depreciation. Now you have me wondering. How long of a "useful life" does the IRS allow for a musical instrument? How long the equipment (read "horn") is expected to last, is an important part of the depreciation calculation. And probably a question that has one answer for tax purposes and another answer in reality.
- Sara

You're above my head for any kind of authoritative answer! But I THOUGHT I recall hearing that I could pick either 10 years or 5 years.

[howrdhodge]

I did this two years ago, and there were two options: 1) take the full amount in a single year, or 2) depreciate over 5 years. I chose the single year option. 90% of the music work I do is reported on a W2, so I didn't have to do anything extra with a schedule C, etc. So far, so good... I haven't been audited, and no one's come knocking at my door. That particular year I had bought two instruments, so it was about $10,000 that I claimed.

[Snorlax]

Be careful of IRS "HOBBY LOSS" rules!! (retired financial planner/finance professor here)

https://www.tgccpa.com/2016/07/irs-h...ness-or-hobby/ ...lays out some basics. see if it fits you.
https://www.irs.gov/newsroom/hobby-o...tips-to-decide ...from the horse's mouth
https://www.irs.gov/faqs/small-busin...ncome-expenses ...business or hobby?
https://www.local802afm.org/allegro/...axable-income/ ...from Local 802, NYC

[dsurkin]

Now you've done it (tease). You said "depreciation". You may not know it, but my day job is being an Accountant. So I know about depreciation. Now you have me wondering. How long of a "useful life" does the IRS allow for a musical instrument? How long the equipment (read "horn") is expected to last, is an important part of the depreciation calculation. And probably a question that has one answer for tax purposes and another answer in reality.
- Sara

Excuse me for getting a little technical here.

Sara, I think the musicians on this forum are only going to be concerned about tax depreciation, not the useful life for financial statement purposes (GAAP). The only time I can see a musician concerned with GAAP is if he or she has investors or a bank that has financed the instrument - such a situation arises with the investors who purchase Stradivarius string instruments or the like, and lease them to concert artists.

For tax purposes, the recovery period is 7 years. It's not a straight line deduction; it's front loaded using a method called double declining balance. For the current year, the federal tax code has bonus depreciation - 100% deductible in the year of purchase - but most states do not conform to bonus depreciation for state income taxes. There's an alternative method that allows a 100% deduction that many states conform to called Section 179 expensing, but your expense cannot exceed your income net of all expenses other than Section 179. With regular depreciation, you can report a loss from your music business and still take depreciation. Business losses can offset other income, but there's a limit of $250,000 ($500,000 for married filing jointly). If the loss from your music business is more than that amount, consider getting a different job.

To satisfy ethical requirements: this is general advice that may not apply to your situation. You should consult your own tax advisor.

[Sara Hood]

Thank you for the "technical" explanation Dean. I follow what you are saying. I figured that there might be a difference between accounting's useful life and the IRS's useful life. That is why I said that the question probably had two answers. It is interesting that the IRS uses a 7 year recovery period.

And now that I think about it more, I realize I should have known this. I do know this. I just never thought about applying it to musical instruments. It does basically boil down to a different treatment for professional musicians than for hobbyist/amateur musicians.

It is so much fun to find where one part of my life (the professional part) touches another part of my life (the artistic and/or spiritual part), when I enjoy both. Thanks for the digression. I think that we kept it horn/music related enough to be relevant for the forum.

Now all that's left is to wonder if other countries look at musical instruments and playing them the same way as the USA.
- Sara

[Clayton M.]

This conversation reminds me of an episode of “Nathan For You” on Comedy Central, in which the host proposes marketing smoke detectors as a musical instrument to avoid the tariffs imposed on the import.

[lzajmom]

I’m going to look into purchasing an instrument and claiming it as a medical deduction. I’ll post what I find out.
I’m ready to bet that there are some people who post here who could make a VERY legitimate claim.

As a once-upon-a-time tax accountant, I'd be very surprised if you could find any legal claim to a medical deduction here. Not saying that a medical deduction should or shouldn't be permissible, but just that I don't think one is. I don't believe the IRC addresses it, and I would be shocked if there were any relevant regulations or rulings. Your best hope would be if there are any U.S. Tax Court decisions that provide judicial law on the matter. Our government isn't known for being particularly progressive in areas that only benefit the taxpayer.

In real life, a tax attorney would probably tell you one of three things, depending on her/his own risk tolerance:

1) Definitely don't, it's too risky! -or-
2) Let's do it because I love me a good legal battle, -or-
3) I don't feel great about it, but try it and see if you get audited.

Personally, I would lean toward 1, but I might accept 3 if the client understands the risk and is willing to pay for litigative services.

As it relates to income deductions, Dave and John are correct. Dave's caution about hobby loss rules is especially helpful. However, if you have a legitimate business (not a hobby), and you can therefore rightfully deduct related business expenses, you should consider whether you also qualify for home office (studio/practice area) deductions and/or deductions of travel expenses.

As the kind of tax accountant who was always too ethical (read: black and white) to suit the attorneys (read: people who are paid to live in the gray area) I worked around, I'm gonna give +10 points to every hobbyist who correctly reports their performance-related income, however minimal it may be! (I need that hand-clap emoji for this.)

[John Morgan]

...As the kind of tax accountant who was always too ethical (read: black and white) to suit the attorneys (read: people who are paid to live in the gray area) I worked around, I'm gonna give +10 points to every hobbyist who correctly reports their performance-related income, however minimal it may be! (I need that hand-clap emoji for this.)

That is where I am now, a few gigs, an orchestra that pays peanuts, a church gig now and then, etc. I file a Schedule C and claim "most" of what I get. I may miss one or two here or there, but try not to. All of this income is less than $1,000 (the orchestra is $600-$700 and I get a Form 1099 from them every year).

So maybe I can get +8 or +9 points?

[Sara Hood]

This depreciation and tax stuff can be a deep dive. But it is starting to scratch another intellectual itch of mine. I was wondering how many musical people (using this forum as a sampling), are financial type people by day (or were before they retired).

In the US, it is common to get "put in a box" based on what you do. Working in accounting/finance, or otherwise with numbers suggests you are of a particular personality type and temperament. And being musical or playing an instrument (or being involved with other performance arts), suggests another. The two are seen as being very far apart. Yet experience has shown me that people are multidimensional and often would fit in several boxes, if allowed. Which life does not give much opportunity for. Too out of the box that would be.

So as not to turn this into a conversation about the possibility of making a living as a musician, or about the injustices of typifying/judging people based on a few outwardly presented characteristics, I would rather stick with the inquiry about how many of us on the forum are both financial/numbers people and musical people. But that may need to be a separate post topic all together (laugh).

And the accountant side of me still wants to know about the tax treatment of musical instruments and musicians in countries other than the USA (more laughing)!

- Sara