Doing your taxes is a delicate dance between how much you make working as an actor and how much it costs you to generate that income. Here’s everything you need to know about saving money with tax deductions, with expert advice from a certified public accountant who specializes in working with performers.
Answering this question can help you determine the best way to handle deductions. If you haven’t deducted your expenses on an IRS Schedule C form in the past, doing so now can give you a place to deduct those expenses if you qualify. Only certain business types can use a Schedule C, including a sole proprietorship. This means your business is run by one individual (you) who is personally liable. However, if you want to conduct business under a different name, you can register for a DBA, or “doing business as,” name. This is a simple and inexpensive way to establish yourself as a company and help support your claims for business write-offs without creating a separate entity. You’ll still be personally liable for your business and remain a sole proprietorship, but you can conduct work and open bank accounts under your filed DBA name.
A Google search for “DBA and your city/state” will get you to a local government website where you can learn what you need to know to move forward. You will also see listings of private, for-profit, and third-party services that can set this up for you for a fee. Avoid that cost; this process is easy enough to do on your own.
As your acting career grows, filing as another type of business entity may serve you better than remaining a sole proprietorship. Other types you can consider include a limited liability company (LLC) and corporate structures such as an S corp, often called a “loan-out” corporation. If you’re the only member of an LLC, you can still use a Schedule C; but different entities will require different types of tax filings. A tax professional will be able to determine the best business structure for you and your work-in-progress career and can help you with the right forms.
The biggest expenses that actors, performers, and other industry professionals can deduct are:
- Automobile: You can either write off the business use of your car or truck using the IRS standard mileage rate, which is adjusted annually, or by logging the actual cost of operating your vehicle. For most actors, it’s easier to use the standard mileage allowance; just remember that the miles you use for personal reasons are not deductible. For 2022 taxes, the standard mileage rate is 58.5 cents from Jan. 1–June 3, and 62.5 cents from July 1–Dec. 31.
- Home studio: If there’s a space at your residence that you use only for professional reasons, such as a home recording studio, rehearsal space, the space where you store you library, or the office where you handle correspondence and do your business record keeping, then you may be able to receive a deduction for it. To count as a deduction, it must be your primary place of business and where you meet with people for business-related reasons. As per the exclusive use requirement, the space cannot be used for other purposes. For example, if your recording studio is also where you host parties, you can’t receive a deduction for it. “Be careful when allocating home expenses,” says Peter Jason Riley, a CPA who specializes in helping artists, actors, and performers with their taxes and author of “New Tax Guide for Writers, Artists, Performers, and Other Creative People.”
- Equipment: Your ring light, camera, and computer can all be deducted thanks to the terms of what the IRS deems their “useful life.” If you acquire the equipment for your business and expect it to last more than a year, you can spread the cost over several tax years, deducting part of it each time. This is called depreciation. Per the IRS, most computers and cars have a depreciation lifespan of five years, while instruments and machines have a lifespan of seven years.
- Film and recordings: You can also receive deductions for items created, such as films, recordings, and books. The cost of creating these goods that continue having value is deducted through a process called amortization. The IRS asks you to either estimate how much and when you’ll receive income from sales of your product or to divide the production cost by its anticipated useful life.
- Travel and meals: Business travel deductions include “ordinary and necessary expenses you have when you travel away from home on business” for what the IRS calls a “bona fide business purpose”: There needs to be a real reason that you must be at the location. If it qualifies, you can deduct expenses for travel by plane, train, and automobile—as well as buses, taxis, and ride shares. You can also deduct the cost of sending baggage, business-related car rentals, lodging, meals, laundry services, and business calls. Remember that many of these are only partially deductible; meals, for instance, are usually only 50% deductible. If you struggle with keeping itemized receipts for your business travel and meals, you can use the General Services Administration per diem look-up tool to calculate standard rates worldwide.
- Startup: Any costs that occur before your business is up and running can be deducted. Startup costs are cumulative, and they amortize over five years.
Other ways you can save this tax season include deductions for:
- Unions, professional societies, organizations, and professional registries
- Agents, attorneys, and accountants
- Payments for classes and coaches
- Production-specific cosmetics, hair care, and wardrobe
- Headshots, professional photos, resumes, and professional websites
- Relevant letters and postage
- Specific supplies, such as theatrical books and sheet music
- Business communication devices
- Films, TV shows, theatrical performances, and concerts. This rule applies to live performances as well as taped ones—meaning that, yes, your Netflix subscription fee counts as a deduction. Just be sure not to allocate it completely as a business expense, since the IRS likely isn’t going to believe that you watched your 100th “Gilmore Girls” rerun for career research.)
- Promotional tickets
- Rentals of rehearsal halls and other such buildings
- Professional hires such as a sound engineer or makeup artist
- Office rent
- Equipment repair
- Tax preparation (So meta!)
- Promotional tapes
- Business-use internet—as with streaming services, be sure to allocate some of this as a personal expense.
- Cloud/web services
- Trade publications
Whatever your business structure, the root of any write-off you intend to take is your ability to substantiate that deduction. Allocate expenses “very carefully and systematically,” Riley advises. It’s important to set up a system that will help you easily keep track of the expenses you incur during the year so that you’re prepared to take advantage of all the deductions that you’re legally entitled to take. You’ll have to have earned money as an actor during the reporting year (and have reported it as income) in order to write off any related expenses.
The 2017 TCJA tax bill disallowed all employee business expenses on Form 2106 except for the rare performers that qualify under the QPA (Qualified Performing Artist). This was a blow for many professional performers and has accelerated the use of the “loan-out corporation” for many performers and other arts professionals, Riley says. While the employee is allowed no write off for employment related expenses starting in 2018, deductions against self-employment income are written off dollar for dollar directly against the self-employment income on the Schedule C. So if you are receiving your compensation on the 1099 and are self employed, you can deduct all related expenses.
Take the time to research and find a tax preparer who has experience working with actors. While this service may initially cost more than your local tax preparation office, the overall savings and write-offs you can gain will be money well spent. A professional tax preparer can advise you on the best business entity for your work and how to maximize the value of your legitimate write-offs, both in the categories listed here and any others that may be deemed appropriate.
Disclosure: This communication is on behalf of Backstage LLC and its affiliates (“Backstage”). This communication is for informational purposes only and contains general information only. Backstage is not, by means of this communication, rendering legal, financial, accounting, business, tax, or other professional advice or services. This communication is not a substitute for such professional advice or services nor should it be used as a basis for any decision or action that may affect your interests. You should consult a qualified professional advisor. Backstage does not assume any liability for reliance on the information provided herein.