financial question...

e unum pluribus

e unum pluribus

New member
ok i posted this here because it says you can post stupid questions here...


if you start a home recording studio and release your own stuff and start a record "label" can you claim that on your taxes as using part of your home for a business and get a tax break (like when you itemize and claim it as a deduction?)


i know with a really good lawyer you probably could but have any of you average joes done this and if so how???
 
Whether you can or not depends on the country you are in and the level of activity you engage in.

In Australia I can register the business, then claim depreciation on the gear I get.

Sometimes, though, the Tax Office will decide that your level of activity qualifies you only as a hobbyist.

Providing financial advice is a risky business, and best left to the experts (which I'm not).
 
in the US, you can do this. You have to apply for a Tax ID# and keep track of everything. In the end, it probably will not do you a lot of good unless you are doing some serious business and buying lots of gear. For that matter, you can do it just being in a band and technically, you are supposed to if you make money at it.
 
Thunder33 said:
You have to apply for a Tax ID#
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I know I'm green but.. Does this cost money?

Edit: Yes it does...

"All you really need to do is go down to the county clerks office pay 20 bux for a DBA and file for a Tax Number and bam! your a record label. " - bigwillz24
 
OK, I'm self employed with a home based business, so I can answer this question.

If you're record label is your business, you can count that as income and expenses...here's the skinny:

The room in your home that you use as a studio you need to measure; lets say its a 15' by 20' room, or 300 square feet. Compare that to the rest of your home, lets say for sake of argument that it is, 1800 square feet total. That means that roughly 17% of your home is your office. You can write off 17% of your house payment and utilities (sorry, cable doesn't count). You do not have to have a Federal Tax ID number unless you've incorporated or formed an LLC, your SSN serves as that until you incorporate. The flip side of that is you have to pay the employer's half of FICA tax, which is 7.625% of your wages in extra taxes. That's what "self employment" tax is. All of the gear you have purchased is tax deductable as well. You need to keep receipts for everything. If you travel for business, say to meet a client, do an on location recording, etc, you'll want to document your mileage. The deduction for mileage last year was $.40 a mile prior to August 31st, $.48 a mile after.

If you are making some serious cash with your business, you may want to look into opening a S.E.P. (simplified employee pension plan) through your accountant. You put up to 20% (doublecheck that) into that and it is tax deferred too.

You will also need to start making quarterly estimated payments to the IRS to avoid fees and penalties throughout the year.

Of course, being that I am not a tax professional, just a self-employed person, you need to find a qualified accountant in your area to help you get all this set up. You may want to check out www.daveramsey.com (financial counselor) and click on his E.L.P.'s, endorsed local providers.

Hope that helped.
6
 
OK I am an accountant, lemme correct a few things.

First off, you do NOT need a federal tax ID number unless you incorporate or have employees. If you do need an ID number, it does not cost anything to get one.

You may need a local business license. That is not a tax ID number. The cost of that license will vary widely, and may subject you to local license taxes (often based on receipts) or local property taxes on your equipment.

You may also need to register a fictitious business name (DBA) at the local level. That is a one-time cost for a filing fee.

sixways was basically correct about the home office deduction, but there is one giant big caveat: you can't use a home office deduction to generate a net loss from the activity. Therefore, you won't be able to offset other sources of income with a home office deduction, just your studio income.

Also you cannot simply writeoff a portion of you "house payment" unless you are renting. If you own, then you claim a portion of mortgage interest (which you are probably already deducting anyway), as well as depreciation on your house, taxes, utilities, and insurance.

The flip side of that is you have to pay the employer's half of FICA tax, which is 7.625% of your wages in extra taxes. That's what "self employment" tax is.
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Strictly speaking, self-employment tax is both halves, or 15.3%, or 92.35% of your net, and you get a deduction against your income for 1/2 the self-employment tax. It works out to something like 12%.

The deduction for mileage last year was $.40 a mile prior to August 31st, $.48 a mile after.
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It was $.405 until August, and $.485 through December, but for 2006 it's dropped to $.445.

You will also need to start making quarterly estimated payments to the IRS to avoid fees and penalties throughout the year.
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Yup. Welcome the Working Week!
 
And to add, I forgot about being able to deduct your State Tax payments (if your state has an income tax) which includes your car tag. Also, if you've made any significant purchases that had state sales tax this year, you may need to look into writing that off instead of your State income tax (if the amount was big enough).

I suppose I misspoke earlier, I did assume you were renting your home and that you knew you were already responsible for the other half of FICA tax.

6
 
I have a question...how can i really release my own albums? well currently i have studio..but how will i actually release the CD's in huge quantities and put it in stores etc.? im really curious
 
mshilarious said:
OK I am an accountant, lemme correct a few things.

First off, you do NOT need a federal tax ID number unless you incorporate or have employees. If you do need an ID number, it does not cost anything to get one.

You may need a local business license. That is not a tax ID number. The cost of that license will vary widely, and may subject you to local license taxes (often based on receipts) or local property taxes on your equipment.

You may also need to register a fictitious business name (DBA) at the local level. That is a one-time cost for a filing fee.

sixways was basically correct about the home office deduction, but there is one giant big caveat: you can't use a home office deduction to generate a net loss from the activity. Therefore, you won't be able to offset other sources of income with a home office deduction, just your studio income.

Also you cannot simply writeoff a portion of you "house payment" unless you are renting. If you own, then you claim a portion of mortgage interest (which you are probably already deducting anyway), as well as depreciation on your house, taxes, utilities, and insurance.



Strictly speaking, self-employment tax is both halves, or 15.3%, or 92.35% of your net, and you get a deduction against your income for 1/2 the self-employment tax. It works out to something like 12%.



It was $.405 until August, and $.485 through December, but for 2006 it's dropped to $.445.



Yup. Welcome the Working Week!
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What form would need to be filled out for this? I called a local tax place and they want $200 to file 2 forms. She mentioned I need a schedule C Itemized deduction list. I'm going to try filing online to save some money.
 
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