Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
Tax Prof said.....

You can use section 179 to expense the equipment, but your deduction would be limited to the amount of income. You couldn't use it to create a loss, only reduce income from music to $0.


That's not quite true. This person has a salary in addition to income from music. He can not deduct more than his taxable income from all active trades or businesses. This includes his salary as an employee. Therefore, he can do more than reduce income from music to $0.

Then jailleres said..........

As for deducting equipment: First, your business (musician)has to be profitable 2 years out of 5 or the IRS will deem it a hobby and you will owe the taxes back plus interest. You must show that you intend to make a profit.


That also overstates the case. The IRS does provide a safe harbor if you are profitable in 2 years out of 5 to protect you from having the hobby loss provisions applied, but that does not mean that if you don't meet that test, your deductions will automatically be denied. If you can prove by other means that you are engaged in the transaction for profit, you will be able to deduct the item.

Rip
Print the post  

Announcements

Disclaimer:
In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.