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  #1  
Old 05-11-2013, 09:14 PM
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Default Drums and American taxes

I was reading over at drumtips.com and I came across this tip:

66. Deduct EVERYTHING! Us drummers are self-employed (most of the time). We operate as a small business and a small business has full legal right to deduct expenses. Hire a tax consultant. Negotiate a reasonable fee and make sure you have receipts for everything. As a consultant once advised, "Even if you deduct too much and are audited, you will still be better off by paying backtaxes or a small fine, as compared to losing an enormous amount of money through the years by not trying."

I was actually thinking of doing this but I was advised against it, but now that I think about it more, I think I should be deducting things. I mean, I pay $140 per month in rent at this studio. Plus all the gas to go to gigs, that should be deducted. Things need to be deducted if I'm in a band and this is my right to do so. What do you all think about it? Do you deduct band expenses? It sure would have helped me this year to deduct some of the cost of doing business. But the problem I have is that I chip in for the studio. Another guy pays the landlord and gets the cash receipt. So, without a receipt, I can't deduct this expense because there is no document to prove it.
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Old 05-11-2013, 09:16 PM
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Default Re: Drums and American taxes

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Originally Posted by Midnite Zephyr View Post
I was reading over at drumtips.com and I came across this tip:

66. Deduct EVERYTHING! Us drummers are self-employed (most of the time). We operate as a small business and a small business has full legal right to deduct expenses. Hire a tax consultant. Negotiate a reasonable fee and make sure you have receipts for everything. As a consultant once advised, "Even if you deduct too much and are audited, you will still be better off by paying backtaxes or a small fine, as compared to losing an enormous amount of money through the years by not trying."

I was actually thinking of doing this but I was advised against it, but now that I think about it more, I think I should be deducting things. I mean, I pay $140 per month in rent at this studio. Plus all the gas to go to gigs, that should be deducted. Things need to be deducted if I'm in a band and this is my right to do so. What do you all think about it? Do you deduct band expenses? It sure would have helped me this year to deduct some of the cost of doing business. But the problem I have is that I chip in for the studio. Another guy pays the landlord and gets the cash receipt. So, without a receipt, I can't deduct this expense because there is no document to prove it.
A ledger is a form of a record. I spreadsheet all of my expenses and my tax accountant says that that is sufficient. However, any major equipment purchases should be recorded by receipt.
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Old 05-11-2013, 09:19 PM
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Default Re: Drums and American taxes

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A ledger is a form of a record. I spreadsheet all of my expenses and my tax accountant says that that is sufficient. However, any major equipment purchases should be recorded by receipt.
Ya, that's a good idea. I should probably find an accountant to help me out for next year.

PS. Sorry bout the double post, Admins, but I can't seem to delete the other one. :(
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Old 05-11-2013, 09:33 PM
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Default Re: Drums and American taxes

I own an electrical contracting company. My accountant wife advised me to report all my drumming income, as well as all my drumming expenses, included along with my electrical business income and deduction. Just because my business is named Ace Electric, there's nothing that doesn't say I can't provide electric and backbeat services.

What I need to find out from her is...do you need to start a business (eg joes drumming for instance) to legally be able to make these deductions. I'm thinking you might. If you work for McDonalds only, and claim drumming expenses...not sure if that is allowed. It may be, I'll find out and post what my wife says.
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Old 05-11-2013, 09:41 PM
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Default Re: Drums and American taxes

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Originally Posted by larryace View Post
I own an electrical contracting company. My accountant wife advised me to report all my drumming income, as well as all my drumming expenses, included along with my electrical business income and deduction. Just because my business is named Ace Electric, there's nothing that doesn't say I can't provide electric and backbeat services.

What I need to find out from her is...do you need to start a business (eg joes drumming for instance) to legally be able to make these deductions. I'm thinking you might. If you work for McDonalds only, and claim drumming expenses...not sure if that is allowed. It may be, I'll find out and post what my wife says.
My accountant has not required or even suggested that I "start a business." All I do is, like Al Parrott, keep a record of mileage, expenses, and income (keeping receipts for larger purchases) and give it all to my accountant for him to work his magic. I get 1099s from most bands that I've worked with, so it isn't that hard.

I would not try to deduct expenses if I had no income from playing, though. Too likely to get busted trying to write off a hobby, IMO.
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Old 05-11-2013, 11:25 PM
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Default Re: Drums and American taxes

Yes.

Years ago I found a tax man that specializes in musicians and entertainers.

Even in years where I stopped having music income I went to him anyway since he's generally awesome. Which was good, because there have been spots here and there where I have had music income.

In general yes, all expenses related to making income from music are deductible. Some items, like stage clothing, the IRS doesn't view kindly to as a deduction. Other items, like a CD from your favorite band, can be considered "research."

Consult your local tax specialist.
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Old 05-11-2013, 11:33 PM
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Default Re: Drums and American taxes

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I own an electrical contracting company. My accountant wife advised me to report all my drumming income, as well as all my drumming expenses, included along with my electrical business income and deduction. Just because my business is named Ace Electric, there's nothing that doesn't say I can't provide electric and backbeat services.

What I need to find out from her is...do you need to start a business (eg joes drumming for instance) to legally be able to make these deductions. I'm thinking you might. If you work for McDonalds only, and claim drumming expenses...not sure if that is allowed. It may be, I'll find out and post what my wife says.
No.

Even back in the late 90's when being a drummer in a band was my entire life, I was not required to declare myself a business. Under occupation, I just listed "musician."

The one area where I did run into a head ache was I filed as a musician on my state and federal taxes for years. The City caught wind of this, and came after me for city business taxes. However, most night clubs in L.A. are technically in a different city, and the recording studio we used was outside city limits, and the band PO box was in a 3rd city, so I put this all in a letter, and they stopped coming after me.
(keep in mind, Los Angeles county has 87 separate cities outside of the City of Los Angeles).

Humm...I did declare a chunk of music income last year, I might get another letter soon.
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Old 05-11-2013, 11:41 PM
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Default Re: Drums and American taxes

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.
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Old 05-12-2013, 12:25 AM
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Default Re: Drums and American taxes

If you're declaring (and can prove) income from music, then you are entitled to take deductions. But yes, do consult a qualified tax person. They don't have to be music-oriented, I switched from one of those types (recommended by the union) to an ordinary, sharp CPA used by my family for years, and he opened my eyes to a number of missed deductions. It didn't take long for him to interpret how each expense could be allocated to my business.

Of course, my declared occupation has been musician for quite some time, so there may be certain advantages over just declaring musical income and expenses as an avocation.

But yes, CDs, magazines, clothing, mileage (as it applies to making money with music), storage costs, parking at gigs, gear, union dues & fees, meals & entertainment, software & hardware, gifts, subscriptions, domain name and web hosting if you have a site promoting your music career, others ads and promotion (business cards, etc.) are all deductable, and there's more. Obviously some of these need to be in moderation, or you'll open yourself up to a big fat audit. Just make sure everything is legit, and that you have receipts. Well, even that's not a must... you can declare expenses up to $75 (I believe) without a receipt. Again, not a good idea to have very much of that. The less explaining you have to do in an audit, the better.

And, declare everything you can. No amount is too small. I keep receipts and submit expenses for a couple of screws or washers used on my gear. 50 and 60 adds up over the year, and could easily bump you down into the next lower tax bracket.

But, get a tax guy, don't try this yourself with TurboTax. If you get audited for one year, the IRS can also go back and examine prior returns. If you're walking a fine line with your deductions, you don't want to answer their difficult questions. Play it straight and you'll be fine.

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Old 05-12-2013, 12:25 AM
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Default Re: Drums and American taxes

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Originally Posted by Midnite Zephyr View Post
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.
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Old 05-12-2013, 02:13 AM
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Default Re: Drums and American taxes

Follow DED's advice re: "stage" clothing-- that's kind of a classic red flag for getting audited. And contrary to your consultant's advice, you do not want to get audited, even if you come out a net winner. Otherwise, go nuts. And try to show at least a small profit most years-- if you show a loss for (I think) more than 2 out of 5 years, the IRS declares you a hobbyist and disallows your expenses. A couple of musicians in Minnesota are getting royally screwed by the state revenue people on that front right now. In the context of taxes, "hobbyist" just refers to whether or not you are profitable, not whether or not music is your main source of income-- of even a major one.

You do have to show a minimum amount of income-- $800/year, I think?-- to use a Schedule C, and deduct expenses.
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Old 05-12-2013, 02:41 AM
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Default Re: Drums and American taxes

I get W-2's from both my main bands so it all gets reported. I deduct gear, tolls, gas and parking. It all gets lumped in with my electrical business though, they don't have to be separate. Even if my musical expenses are more than my musical income, it gets mixed in with my "real" job stuff. I'll have a loss on the music side next tax year because of the the Guru's. It will serve to lower my net taxes because I will still show a profit from my electrical business.
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Old 05-12-2013, 02:42 AM
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Default Re: Drums and American taxes

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Follow DED's advice re: "stage" clothing-- that's kind of a classic red flag for getting audited.
Never had a problem with stage clothing, although my expenses are relatively small - $400 one year, $260 another, $53 another. Hey, sometimes ya gotta go buy a Western shirt or five to work with a band, and Target's $15 shirts just don't cut it.

As I mentioned before, you can't go crazy with most expenses, they have to make sense compared to the income being declared. If I make $10,000 with my Americana bands, I think I'm entitled to claim a few hundred $ in appropriate clothing to help ensure my desirability/marketability as a team player, resulting in continued employment in a fickle business.

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Old 05-12-2013, 02:21 PM
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Default Re: Drums and American taxes

I'm a firm believer that you should get what you can back from the government... they're quick enough to take it from you, and I bet they take plenty! So, if you're entitled to anything then grab it.

The guitarist in my band, she's a guitar teacher by trade so she claims EVERYTHING she can back that she can get away with and she saves a fair amount of money each year!
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Old 05-12-2013, 04:51 PM
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Default Re: Drums and American taxes

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If you're declaring (and can prove) income from music, then you are entitled to take deductions.

And, declare everything you can. No amount is too small. I keep receipts and submit expenses for a couple of screws or washers used on my gear. 50 and 60 adds up over the year, and could easily bump you down into the next lower tax bracket.

But, get a tax guy, don't try this yourself with TurboTax. If you get audited for one year, the IRS can also go back and examine prior returns. If you're walking a fine line with your deductions, you don't want to answer their difficult questions. Play it straight and you'll be fine.

Bermuda
Ya, I wanna play it straight. I just know that people are getting deduction for all kinds of stuff these days. We should be able to do the same regardless of whether we are showing a profit or not. I had a business a couple years ago with my ex-wife and we showed a net loss for a couple years. It helped our taxes overall for sure.

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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.
Yes, this is a confusing area and exactly why I should consult a tax specialist. Thanks for the info, I'm sure this is good information for all these guys with up and coming bands. I'm pretty much clueless when it comes to taxes. Probably because I've never been in a band that makes money, but I sure do seem to spend a lot.

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Follow DED's advice re: "stage" clothing-- that's kind of a classic red flag for getting audited. And contrary to your consultant's advice, you do not want to get audited, even if you come out a net winner. Otherwise, go nuts. And try to show at least a small profit most years-- if you show a loss for (I think) more than 2 out of 5 years, the IRS declares you a hobbyist and disallows your expenses. A couple of musicians in Minnesota are getting royally screwed by the state revenue people on that front right now. In the context of taxes, "hobbyist" just refers to whether or not you are profitable, not whether or not music is your main source of income-- of even a major one.

You do have to show a minimum amount of income-- $800/year, I think?-- to use a Schedule C, and deduct expenses.
Ya, the last thing I wanna do is get into trouble with the IRS, but things like rent, gas, expenses on the road, etc. These are all legitimate deductions. Not so much the gas it takes to get to the studio and back home,but the gas it takes to go from the studio to the gig and back - that should be deductible.

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I get W-2's from both my main bands so it all gets reported. I deduct gear, tolls, gas and parking. It all gets lumped in with my electrical business though, they don't have to be separate. Even if my musical expenses are more than my musical income, it gets mixed in with my "real" job stuff. I'll have a loss on the music side next tax year because of the the Guru's. It will serve to lower my net taxes because I will still show a profit from my electrical business.
Yes, you got it made because, if I'm not mistaken, you are already a sole proprietor. I had a Drafting Service last year, but it parlayed into this full-time position that I do now (for tax reasons), but I was scared to lump in my musician expenses with the drafting service expenses. Now, if I had consulted a tax specialist, I probably would have paid a lot less to Uncle Sammy.

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Originally Posted by JohnnySomersett View Post
I'm a firm believer that you should get what you can back from the government... they're quick enough to take it from you, and I bet they take plenty! So, if you're entitled to anything then grab it.

The guitarist in my band, she's a guitar teacher by trade so she claims EVERYTHING she can back that she can get away with and she saves a fair amount of money each year!
I agree with everything you just said, which is the whole point of this thread...

Thanks again for all the great replies, I hope this thread is useful information for a few others out there too. Cheers!
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Old 05-12-2013, 05:07 PM
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Default Re: Drums and American taxes

Paul, is the drafting service your business or are you an employee of another business?

I am incorporated, but either way, corporation or a sole prop, I can still report music income and deduct music expenses.

There are some categories that are red flags, especially meals and entertainment.

If you don't take everything you are legally entitled to, well the government likes it that way.

When it comes to taxes and insurance's, I take every penny I am entitled to, and especially with insurance companies, make them pay for anything they have agreed to. F them. They F me every chance they get. It's a big game and they are not on your side.
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Old 05-12-2013, 05:16 PM
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Paul, is the drafting service your business or are you an employee of another business?

I am incorporated, but either way, corporation or a sole prop, I can still report music income and deduct music expenses.

There are some categories that are red flags, especially meals and entertainment.

If you don't take everything you are legally entitled to, well the government likes it that way.

When it comes to taxes and insurance's, I take every penny I am entitled to, and especially with insurance companies, make them pay for anything they have agreed to. F them. They F me every chance they get. It's a big game and they are not on your side.
This is true. I've been naive about tax deductions for a long time, but it is just getting ridiculous now. So I have to be more prudent these days because they are just running free with our dough.

The drafting service was just me doing side jobs for various Land Surveyors. But I did a big job with the company I am currently employed with and they ended up needing a full-time drafter because business finally picked up in California. It's nice to have benefits and health insurance, I guess. Just in case, you know?
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Old 05-12-2013, 06:16 PM
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I get W-2's from both my main bands so it all gets reported. I deduct gear, tolls, gas and parking. It all gets lumped in with my electrical business though, they don't have to be separate. Even if my musical expenses are more than my musical income, it gets mixed in with my "real" job stuff. I'll have a loss on the music side next tax year because of the the Guru's. It will serve to lower my net taxes because I will still show a profit from my electrical business.
Doesn't being a W2 employee eliminate most of your deductions, though? They are for business expenses, and a W2 employee is not considered to be "in business." It sounds like you're not declaring any Schedule C music income, and are putting your music expenses, and any non-W2 music income, under your electrical business's Sch. C? If I'm following you correctly, that seems like it would be trouble for you if you ever get audited.

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Ya, the last thing I wanna do is get into trouble with the IRS, but things like rent, gas, expenses on the road, etc. These are all legitimate deductions. Not so much the gas it takes to get to the studio and back home,but the gas it takes to go from the studio to the gig and back - that should be deductible.
You generally don't deduct the actual fuel cost, you deduct a standard rate for all the miles you travel for anything music related-- going to gigs, going to rehearsals, to the studio, to the record store, drum shop, or Staples or wherever for office supplies, etc, etc.
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Old 05-12-2013, 07:01 PM
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You generally don't deduct the actual fuel cost, you deduct a standard rate for all the miles you travel for anything music related-- going to gigs, going to rehearsals, to the studio, to the record store, drum shop, or Staples or wherever for office supplies, etc, etc.
Actually, you simply report the eligible miles, and your tax guy (or IRS-approved software) applies the correct deduction, as that has changed with the rising cost of fuel. I don't know what the per-mile rate is, but it doesn't really matter, we get what we get.

In addition, repairs and maintenance are deuctible if they exceed the amount being claimed for mileage. But that amount is pro-rated at the percentage of the amount of business miles compared to all miles driven that year. Basically, you can claim the higher amount between the two, but not both.

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Old 05-12-2013, 07:33 PM
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Doesn't being a W2 employee eliminate most of your deductions, though? They are for business expenses, and a W2 employee is not considered to be "in business." It sounds like you're not declaring any Schedule C music income, and are putting your music expenses, and any non-W2 music income, under your electrical business's Sch. C? If I'm following you correctly, that seems like it would be trouble for you if you ever get audited.



You generally don't deduct the actual fuel cost, you deduct a standard rate for all the miles you travel for anything music related-- going to gigs, going to rehearsals, to the studio, to the record store, drum shop, or Staples or wherever for office supplies, etc, etc.
Sorry, my bad. I meant to say a 1099. Good catch, that's a completely different scenario.
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Old 05-12-2013, 07:43 PM
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Default Re: Drums and American taxes

Receipts, receipts, receipts! Keep them for 7 years, and you'll be okay. Also, be fully disclosing with your traceable income. That one gig where you made $50 from that club that you don't see the point in reporting will come back and bite you in the form of a full-blown audit. I've seen it happen (never to me--fingers crossed!).

Also, a tax consultant is a GREAT idea, at least for one year, so you can see how it's "officially" done. My tax consultant ALWAYS does my taxes better than I do, so it justifies me paying the $250 for him to save me the extra $800...
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Old 05-12-2013, 08:15 PM
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Default Re: Drums and American taxes

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Follow DED's advice re: "stage" clothing-- that's kind of a classic red flag for getting audited. .
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Never had a problem with stage clothing, although my expenses are relatively small - $400 one year, $260 another, $53 another. Hey, sometimes ya gotta go buy a Western shirt or five to work with a band, and Target's $15 shirts just don't cut it.
Per the letter of the law, if your stage clothing can be worn off stage, it is not a deduction.
Even if said outfit is nothing you would WANT to wear off stage.

It is a bit of a grey area, in that the law is not always applied fairly across all professions.

In the case studies I got in school, a construction worker gets to write off construction boots without a thought even though said boots can be worn as every day clothing. A waiter buying a tux to work a wedding can't write off said tux, because you might wear it to a non-working event.
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