To compensate for inflation, the standard deduction for 2000 has been increased. On your 2000 return, you are allowed a standard deduction, which may be claimed regardless of your actual expenses. This deduction is fixed by law according to your filing status and age.
The basic standard deduction is allowed if you are under age 65 and not blind. For 2000, the basic standard deduction has been raised to $7,350 if married filing jointly or a qualifying widow(er); $6,450 if filing as a head of household; $4,400 if single and $3,675 if married filing separately. For persons over age 65 or blind, larger standard deduction amounts are allowed. In the weeks ahead, we will talk about the Standard Deduction and Itemized Deductions in greater detail, and you will be able to choose which is best for you in your particular situation.
Also, be aware that each personal exemption you claim on your 2000 return is the equivalent of a $2,800 deduction. This is up from $2,750 last year. If your adjusted gross income goes above a certain level, however, you could lose all or part of the benefit of your exemptions. This income level ranges from $96,700 (for married filing separately) to $193,400 (for married filing jointly) depending on your filing status. These amounts have also been raised from last year's levels.
Your Business Expenses
The question most often asked of us is, "Just what is deductible as an actor?" Well, there are over 85 professional theatre-related expenses available. Here are just a few. In the weeks ahead, we will list more and explain just how they should be presented when you file your return. (Note: These expenses are subject to certain limitations. Those limitations will be explained in the coming weeks.)
You may deduct the purchase of promotional theatre tickets given to agents or your manager to view your performances; the cost of drama, voice, dance, and speech lessons; photos, resumes, reproductions, postcards, mailers, postage, and publicity; dancewear (including leotards, tights, taps, dance shoes, dance pants, leg warmers, etc.); gifts to people who can or could help you in your career; and tips to dressers and makeup people.
In addition, don't forget union dues, agent and manager fees and commissions, the costs of wining and dining, and equipment like tape recorders and musical instruments. This is only a very partial list. Additional acting-related expenses will appear in future columns in the weeks ahead.
Avoid Double Taxation
Clients often tell us "it doesn't seem fair to be taxed by two states on the same income." They are referring to the fact that, when you work in a state other than the one in which you live, taxes are withheld, and you must file with both that state and with the state of your residence.
What these clients don't realize is that all states have a provision for avoiding that "double taxation." For instance, if your reside in New York State and worked in California, you can get a credit on your New York State return for the taxes paid to California. This is called a "Resident Tax Credit." Simply file Form IT-112R along with your New York State return and attach a copy of the California non-resident return that you filed. New York State will subtract from your New York tax bill all or part of the amount you paid California. By doing this, you avoid paying taxes to two states for the same income.
Sounds confusing? A little, perhaps, but your tax consultant will know about it. Remember, you must pay taxes to your state of residence on your entire income, no matter where you earned it. Don't pass up this credit. It could mean dollars in your pocket.
Job Hunting Expense
Earlier, we began to list many of the theatre-related expenses that you may be able to deduct on your 2000 tax return. We want to continue that list by discussing how to deduct the expense of looking for work out-of-town.
The cost of hunting for a new job is deductible, even if you don't land the job. This ruling is not just for actors; it covers anyone who is unemployed. It is designed to encourage people to look for work in other states or cities if they cannot find work in their home area. (Years ago, job-hunting was deductible only if you got the job.)
However, be careful on this: In order to avail yourself of this deduction, you must be seeking employment in your present line of work. If you are just coming into a profession and looking for that first acting job, that expense is not deductible. You must already have had a job in the business.
So if you are not working and hear of something in another part of the country, regardless of where, and you decide to look into it, whether you go by plane, train, or whatever, keep you ticket stubs, as well as a record of dates you left and returned. Make a note of people you saw. Of course, your food and lodging expenses are deductible, too, so make certain you keep receipts for lodging or hotel.
Deducting Meals Away
Your food expenses can be documented in one of two ways. You may either deduct the actual cost of your meals while away from home on business, as supported by receipts, or you may use the standard meal allowance.
The size of the meal allowance depends upon the city that you visited. There are five different allowances. In order to find out what the allowance is for each city, you should consult IRS Publication 463 (Travel, Entertainment, and Gift Expenses). Contained therein you will find a complete listing of most large cities or counties in the U.S. and the daily dollar allowance for each (either $30, $34, $38, $42, or $46.) If the city you visited is not on the list, you can assume that $30 per day is allowed.
One more thing concerning food: As we told you last year, the percentage of deductibility is 50%. So, for instance, if you went to Los Angeles for an audition and were there three days, you could take the standard meal allowance for L.A.—$46 per day—or $138 for three days. You would then be able to deduct 50% for a meal deduction of $69 for the three days. You should also keep a record of all your travel-related expenses—a diary, a little book, whatever—to support your receipts.
If you drive to that interview or audition, be aware that when an automobile is used for business purposes, you may deduct the actual costs of operating that vehicle while on business. This deduction can be used whether you drove your own auto or a leased one. If you drove your own car, you may elect instead to use the standard mileage allowance for operating your automobile for business. The rates for 2000 were discussed at the end of last week's column. This standard amount covers all operating expenses except parking and tolls. These two you can deduct in addition to the standard amount.