Like men, all deductions are not equal. Some deductions reduce your income dollar for dollar, while other deductions have limitations and consequently have less value. Still other deductions create credits that either reduce your tax or put extra money in your pocket. In the next few weeks, we'll weave our way through the differences.
Everyone has some sort of deductions. You get a prescription from the doctor, you give a few bucks to charity, or you do a little driving around town for your boss. Nothing major. The Standard Deduction is probably better for you. In fact, it's probably more than you can come up with yourself. So if you're single and your deductions are less than $4,400, it's better to claim the Standard Deduction and save yourself the hassle of trying to work that calculator. If you're filing Married Jointly, you get an automatic deduction of $7,350. Head of Household gets $6,450, and Married Separately can claim $3,675. There are additional deductions for those over age 65 and/or blind. There are also special rules if you're a dependant on someone else's return.
In addition to the Standard Deduction, you may also qualify for special tax credits and other dollar-for-dollar deductions. More on that later.
One of the disadvantages in being a struggling actor is the money you have to spend getting your name out there. Some years you have more deductions than income. Some of those lean years make the choice between eating and getting a new wardrobe a hard call. There are the photos and resumés and those thousands of mailings and telephone calls. Running around town in your car going to all those auditions and workshops can cost a lot, too. It's all deductible. So are workshops, union dues, agents and management fees, trips to New York for an audition, and gifts to those elusive casting directors (maximum $25 per person). Books for research, demo tapes, and the trades are also on the list.
Things like grooming and makeup are strictly limited, however. Just getting a haircut doesn't automatically qualify you for the deduction. The hairstyle must be specific to the job and should actually be a requirement (playing a '20s gangster would be an example). The same is true for clothes. Looking neat at an audition is no different from looking neat at an interview for a clerical job, and neither is deductible. A rule of thumb: If you can wear the clothes in the street without causing a traffic jam, it's not deductible. Makeup must be theatrical makeup.
Qualifying Performer Deduction
Now that we've gotten that out of the way, there are a few advantages to all your struggles. Under certain conditions you can claim the Standard Deduction and your acting expenses, too.
Let's say, for example, that the only deductions you have are about $3,000 this year. Normally you'd forget those itemized deductions and just claim the $4,400 Standard Deduction and opt for the Short Form. Don't give up yet. You may be able to deduct $7,400. That should boost your refund.
To qualify you must meet all of the following requirements. You must have received two significant acting W-2s during the year ($200 or more is considered significant enough). If you had only one job, you can't claim the deduction no matter how large or small the income is. Your acting deductions must be 10 percent or more of your total income, and your total income cannot be more than $16,000 for the year.
It's also important to note that you can claim acting-related expenses only. Don't mix up medical or other deductions in your computation. If you're married, you must file MFJ, and each person (if both are actors) must each have two acting W-2s. The gross income limit is the same as Single, so here's a case where it's better being Single. Put your deductions on Form 2106, carry the total to line 31 on the 1040, and write "QPA" to identify the deduction. If you're filing MFJ, both husband and wife would use their own Form 2106, and both must meet the 10 percent rule. This is a perk for actors only.
If your remaining deductions—medical, charitable, other employment expenses, etc.—exceed the Standard Deduction, you would still use the Schedule A.
Also this week, remember that nearly all of your W-2s and 1099s should be in by now. If not, you should be on the phone tracking them down. Don't forget, it's your responsibility to report all your income whether you receive these forms or not.
Next week: what is and isn't taxable. BSW
Frank Wyman is a tax consultant for Amanda Tax and Financial Services.