Tax Strategies: What Expenses Can
You Deduct - And What's Not Allowed?
By Kristin Delfau, EA
Delfau Tax & Financial Services
This month starts a two-part series on tax deductions. So, what exactly can you deduct on your taxes?
As a voice-over artist, there are many legal tax deductions available to you - some that you might know about, and some that you might not.
Here are some ideas to help you maximize your deductions. And that, of course, means more tax savings for you!
PRO VS. HOBBY
First, a word about how the IRS views your eligibility.
In short, you must be considered a voice-over professional to declare certain voice-over business deductions.
For example, if you're a Realtor or in some other profession and want to get into the voice-over business, you cannot deduct the expense of the training to do so.
This is because the IRS says that any coaching, workshops or other educational expenses do not count as work-related education "if it is a program of study that will qualify you for a new trade or business" (IRS Publication 970).
However, expenses such as advertising, business cards, and the production of demos, etc. - do count as part of your business expenses.
SHOW A PROFIT
Even if you are not turning a business profit the first year, that's okay.
However, the IRS wants to see you turn a profit in three of the past five years that you are in business, whether you are working part-time or full-time.
If you don't, they can reclassify your business as a hobby, and you end up not getting all of the deductions that you are entitled to - and you'll be taxed at a higher rate.
Promotional materials are deductible, including all sorts of expenses you’ve incurred to get your voice out there to obtain work. For instance:
If you have a web site to advertise yourself, the costs to create, host, support, and maintain your web site count, as well.
EQUIPMENT & SUPPLIES
If you have purchased home studio equipment (microphone, headsets, monitors, soundproofing ... ) and recording/editing software. These are all deductible.
However, be careful when trying to deduct “mixed-use” items such as laptops, printers, etc. You’ll only be able to deduct the percentage actually used for business purposes, rather than the entire cost of the item.
If you use a voice coach to help you keep on top of your game, these services are deductible if you are considered a voice-over professional.
However, if you are training to enter another line of work, this is not deductible in the eyes of the IRS.
If you purchase study materials, books or any other type of voice-over training materials, these are deductible, as well.
If you belong to a union related to voice-overs (for instance, AFTRA or SAG), you can deduct union fees, along with any association fees related to your voice-over work, such as artist associations, chambers of commerce, and so on.
If you have agents and pay a commission for the work that they find for you, these costs are deductible.
PUBLIC RELATIONS & ADS
If you’ve hired a PR person to help you find voice-over work, their fees are deductible.
Ditto for any subscription services that you belong to in order to get the latest news about casting calls or job opportunities.
Also, if you’ve taken out ads in trade publications, these costs are deductible!
You might be thinking: “Those deductions are great, but how can I keep track of them? Throw them in a shoebox?”
Here’s a better way. Depending on your level of comfort with spreadsheets, using a basic spreadsheet program (such as Microsoft Excel) is probably one of the least expensive ways to track them.
Or, you could try a program such as QuickBooks Simple Start, which, in a limited version, is available for free (go to www.intuit.com and type “Simple Start Free” in the search box).
This would make your life a lot easier and keep your tax preparation fees lower, since your expenses are neatly categorized for you!
ABOUT KRISTIN ...
Kristin Delfau is the president of Delfau Tax & Financial Services in Danbury, CT and the author of Turbo-Mom’s Guide to Saving Money Without Wasting Time (Aji, 2009; http://www.turbo-mom.com). She specializes in flat fee tax preparation and life insurance solutions for individuals.