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Deductions for business expenses

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mailman1704

Guest
Indiana. I have a 3 part question. 1st, I recently joined a musical group and have started earning an amount sufficient enough to warrant claiming it as income. Can I claim business related expenses (parts & equipment, stage clothes, fuel & mileage, meals etc...) as deductions? 2nd, if I purchase a piece of equipment and claim it as a deduction and then decide to sell it at a later date, am I required to claim any part of the amount I receive from the sale as income? 3rd, is there anyone who knows what exactly can be claimed as an expense for this type of business?
 


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loku

Guest
1st, I recently joined a musical group and have started earning an amount sufficient enough to warrant claiming it as income. Can I claim business related expenses (parts & equipment, stage clothes, fuel & mileage, meals etc...) As deductions?
Yes, you can claim all those as business expenses.

2nd, if I purchase a piece of equipment and claim it as a deduction and then decide to sell it at a later date, am I required to claim any part of the amount I receive from the sale as income?
Yes again, if you deduct the entire cost of a piece of equipment, then you have to show the entire sales price as a gain.

3rd, is there anyone who knows what exactly can be claimed as an expense for this type of business?
Any costs you have that you would not have had without the business are deductible as business expenses. For a good explanation of business expenses, and for a lot of other helpful things to you, see IRS Publication 334, Tax Guide for Small Business, which you can download for free at www.irs.gov.
 
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mailman1704

Guest
So in other words, if I don't claim it as an expense when I purchase it, I don't need to claim it as a gain when I sell it?
Also, do we as group need to legally organize the band as a business in order to claim expenses?
 
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roamer5

Guest
Let's say you buy a guitar and get paid for playing it (one of my fantasies). You are then considered a self-employed musician and the guitar is a business asset. The cost basis of the guitar is reduced each year by the allowable depreciation, even if you do not claim it.

So, eventually if you decide to go into investment banking and sell the guitar, any amount received greater than the depreciated value is a capital gain and is reported as income.

The band does not have to form its own business in order for you to claim expenses.

If the band forms a partnership or corporation then that entity files a return reporting income and deducting expenses. You may then be considered an employee of that entity in which case you could only deduct expenses for which you are not reimbursed.
 

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