Originally Posted by
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
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.
Dean L. Surkin
Mack Brass MACK-EU1150S, BB1 mouthpiece
Bach 36B trombone; Bach 6.5AL and Faxx 7C mouthpieces (pBone on loan to granddaughter)
Steinway 1902 Model A, restored by AC Pianocraft in 1988; Kawai MP8, Yamaha KX-76
See my avatar: Jazz (the black cockapoo; RIP) and Delilah (the cavapoo) keep me company while practicing