Taxes for artists do not typically follow the same procedures as a payroll employee. Artists are seen as independent contractors whose income is determined by the financial success of their work.
On one hand, that means every dollar isn’t necessarily noticed or taxed like that of a regular wage earner. On the other, it puts the burden of paying taxes more firmly on the artist.
In the following article, we’ll be discussing what every artist should know about taxes from start to finish. Let’s begin!
1. Make Taxes Your First Priority
Artist taxes may not be a top priority when setting out on this career path, but they absolutely should be. The sooner you can get familiar with the process, the better.
Nothing is more disheartening than gathering momentum, losing sight of what is owed, and then receiving a tremendous financial setback that first tax season. From the very beginning, plan to set aside money to pay taxes first and foremost. It’ll allow you to feel freer to create and market if you do.
2. Learn What Types of Deductions You Can Take
No tax guide for artists would be complete if it failed to touch on the deductions you can take. Deductions allow you to lower the amount of income that is taxable in the eyes of the law. Such items would include:
- Materials that you use in the physical creation of your art
- Research resources such as magazine/software subscriptions, books, and conference registration fees as well as related meals and entertainment
- Relevant travel and car expenses
As you rack up relevant deductions, your taxable income will go down. This also can save you money by keeping you in a lower tax bracket (more on that in the next section).
3. Know Thy Tax Bracket
Tax brackets may change depending on federal and state laws. It’s important that you know what to expect from the tax bracket in your area and that you follow the federal brackets.
4. Follow Changes in the Law
Filing taxes as an artist means knowing what tax legislation is going to affect the current tax year. That’s not always a big deal, but Congress occasionally will shake things up in the form of new legislation and reforms. Stay tuned into the news and read everything you can that might pertain to Schedule C filers, which, in all likelihood, is what you’ll be filing as.
5. Never Assume the Government Will Give You Anything
Pay particularly close attention to drastic changes like the recent stimulus payments offered to defray the effects of the pandemic. In this instance, the payments do not appear to be counted against your 2020 taxes. However, that hasn’t always been the case, and you’ve got to watch the fine print so you’ll know what to plan for.
6. Establish a System for Keeping Up
You’ll want to take these factors into consideration and establish your own system for setting aside money, keeping up with expenses, and tracking your deductions. A paystub template might also be a good idea to help you on the administrative end.
Taxes for Artists Are More Complicated But Still Doable
Handling taxes for artists can be intimidating on the surface because it requires you to keep up with more than pre-tax payroll deductions do. However, training yourself to do the work on the front end will allow you more peace of mind going into tax season.
Best of luck as you prepare. For more tax and financial tips, keep tabs on our blog.