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An Obscure Tax Deduction Helps Low-Income Musicians in the U.S.

Author: Brad Howland
First Posted: Sept. 24, 2004

The Performing Artist Deduction can be used to reduce the taxable income of employed musicians earning less than $16,000/year, without the usual limits imposed when claiming itemized deductions on Schedule A.

Note that this tax break only applies to employed musicians. Self-employed musicians should report their gross income and expenses on Schedule C.

The rules for taking advantage of the Performing Artist Deduction are quite restrictive. You must meet all three of the following conditions:

  1. You perform services in the performing arts for at least two employers during your tax year. (You are considered to have performed services in the performing arts for an employer only if that employer paid you $200 or more.)
  2. Your allowable business expenses related to the performing arts are more than 10% of your gross income from the performing arts.
  3. Your adjusted gross income is not more than $16,000 before deducting these business expenses.

If you meet the above conditions, you would first complete Form 2106. Then transfer your expenses from Line 10 of Form 2106 to Line 33 of Form 1040. Write "QPA" plus the amount of your performing arts related expenses on the dotted line next to Line 33.

If you do not meet the above conditions, you have to deduct your expenses as an itemized deduction on Schedule A, which unfortunately subjects them to certain limits. You can only deduct expenses in excess of 2% of your Adjusted Gross Income, and if your itemized deductions are less than your standard deduction you won't derive any benefit from them anyway.

Other Considerations

When calculating your Adjusted Gross Income to meet condition 3, you must take into account income from all sources, not just your income from music.

There are special rules for married persons. You must file a joint return unless you lived apart from your spouse all year. If filing a joint return, you calculate conditions 1 and 2 separately for you and your spouse. However, condition 3 applies to your combined Adjusted Gross Income. In other words, if you are single you have to be starving, but if you are married you have to be practically destitute!

As with tax deductions for self-employed musicians, your expenses should be thoroughly documented with receipts, auto logs, etc.

All of the above is taken from the 2003 tax return. I haven't seen the 2004 US 1040 return yet, but it is likely that the deduction will still be available.

Related Websites

IRS Publication 529
Miscellaneous Deductions
(For use in preparing 2003 Returns)

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