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Financial Advice

Lower Your Taxable Income With Deductions! (Part 1)

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Lower Your Taxable Income With Deductions! (Part 1)
If you have substantial deductions for expenses, as most actors do, hopefully the amount will exceed the standard set by the IRS. These expenses can lower your taxable income, reducing the amount of money you owe and hopefully getting you some walking-around money. This column will focus on those deductions that you share with "civilians" next week we'll turn our attention to performer-specific deductions. 

Unreimbursed Medical: These all count: health insurance, every copay, dentist, eye exam, prescription, dental appliance, glasses, contacts, even an ankle brace from your local drugstore if the purchase was prescribed by your doctor. Over-the-counter items are not deductible.

Sales Tax: If you live in Washington state, Florida, Nevada, or Texas, you have no state income tax, so you can add up and deduct your sales tax. Otherwise your tax preparer will determine if including sales tax on major purchases—anything over about $500—will be advantageous to you.    

Real Estate Taxes/Home Mortgage Interest: If you own a home, you will get forms from your mortgage holder with these amounts; if you don't own a home, don't worry about it. Rent is only a factor if you can claim your home as an office; then you'll need the square footage of your residence, the square footage of your office space, and the totals of your rent and utilities. The IRS has very specific rules on who can claim this; you must have no other place to do the work, you should receive clients here, and ideally it is a stand-alone space, such as a converted garage. If you have a futon couch in that area, it's a bedroom and not an office.

Charitable Contributions: One type is monetary contributions to a recognized charity. Giving five bucks to a homeless guy may bring you good karma but doesn't count toward your taxes. The second type is from donating goods to a thrift store; then you can deduct the value of the items as determined by the store. You may have paid $100 for that shirt, but if they sell it for $5, that's what you claim.

Last Year's Tax Prep Fee: The cost of computer software, how-to books and lessons, or a tax preparer's fee.

Investment and Business-Related Legal Fees As we discussed last week, parking and traffic tickets are not deductible, but if you paid a lawyer or CPA for business purposes, that cost is deductible. 

Major Equipment: If you're a musician and you bought an amp for your guitar, or a soundboard for mixing, you can deduct the expense. Perhaps a new computer or editing software for cutting your webisode series. Maybe you take actors' headshots and purchased a new camera and lenses. Get the picture? 

Advertising: You may sell real estate, Avon, and especially your own acting prowess; in today's market you need business cards, maybe post cards, and most definitely a website. 

Business Gifts: The IRS allows you to claim $25 per person when giving a gift. So if you give Chuck Sloan a gift, you can deduct $25 even if you spent $400 on Giants playoff tickets. If you give Chuck Sloan & Associates that gift, however, you can deduct $25 times 15 employees for a total of $375. 

Business Meals: If you specifically meet with a colleague or potential employer to discuss business over coffee, drinks, and/or a meal, then write off the cost.

Office Supplies: Printer paper, ink, envelopes for your headshots, postage; this is fairly straightforward stuff.

Trade Publications Back Stage, Variety, The Hollywood Reporter = yes.  Crochet Today, Bass Fisherman, Dumpster Diving for Fun & Profit = no.  That is, unless you are producing a show about yarn crafts, fishing, and dumpster diving for fun and profit.

Stay tuned for more glorious deductions next week.

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