Originally Posted by Midnite Zephyr
Ya, we're not making an income yet. We'd be lucky to offset some of the studio cost from the few gigs that we have. We're just starting to gig, but I'd like to think of it as more than a hobby because I have no interest in doing that j.o.b. that I do for 40 hours a week any longer than I have to. So, all the expenses are more than just hobby expenses in my mind.
Thank you all for your replies. This will be my first year talking to a tax consultant. We should be able to deduct what we can if you play a certain amount of gigs. That would show more than just hobby status I believe.
Hobby income is still income.
The only difference in hobby income is you can't declare a loss. You can declare your deductions equal your income giving you a net zero taxable profit, but you can't declare a loss. The main advantage of declaring your music a "hobby" is taxble agencies (IRS, state and local) are less likely to scrutinize you.
There might be a few other difference that escape me at the moment in terms of what you can deduct.
If you do not declare a hobby, and show a loss from music, and use that to offset other non-music income, technically, the IRS can force you to prove that you're not indeed just a hobbiest (although I never had that experience myself). There were a few years where I had minimal income from from music, so I did just declare it a hobby as it's less complicated.
So far, the IRS hasn't asked why I went from "professional musician" to "hobiest" and then back to part time "professional" last year. But then again, I didn't declare a loss from music last year.