Tax Optimization For Musicians And Entertainers: Deductions For Creative Expenses – As part of the Consolidated Appropriations Act (2021), the business food deduction was changed. Food and beverages purchased at the restaurant are 100% deductible in 2021 and 2022. This temporary 100% discount is designed to help restaurants, many of which have been affected by the COVID-19 pandemic.

However, for purchases made after 2023, the rules revert to how they were defined in the Tax Cuts and Jobs Act. This means that only 50% of business-related meal purchases are deductible.

Tax Optimization For Musicians And Entertainers: Deductions For Creative Expenses

Entertainment expenses, such as tickets to a sporting event or concert, are still not deductible. However, team building activities were abandoned for employees.

Entertainment Expenses And The Creative Industries

Most rules are very cut and dry (see examples below). However, senior tax manager Eunice Chan is asked questions about several tax situations

“Tickets cannot be purchased to transport a business customer to a sporting event or other entertainment event. “The charitable deduction for the contribution to the right to purchase tickets to college sporting events was over,” Younis recalls. “But you can skip the food you eat at these events,

However, team building is allowed and 100% discounted, including ticket purchases for your employees. According to the tax code, “expenses (including benefits) for recreational, social or similar activities primarily for the benefit of employees” are 100% deductible.

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50% off on late-night employee dinners. Perks like mini office coffee and snacks

Continuing education cruise ship conferences have their own rules. Read more about them on our blog.

Although the tax preparer may not require a copy of your dinner receipt, the IRS says you should keep the receipt and the names of registered attendees, restaurant names, business purposes and the dates of the audit.

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If you have unusually high expenses compared to the previous year, this may be an area where you are at risk of being affected by the IRS. Maintaining documentation will help with audits. If you can’t prove your expenses, you’ll have to pay back taxes, penalties, and interest.

Minimizing your tax burden is important to achieving your long-term financial goals. Together with our financial planning team, our tax professionals play an integral role in ensuring that we complete all measures to minimize tax liabilities for our clients.

Confirm your complimentary consultation to learn more about how our planning and tax teams can help your practice.

Questions To Ask An Iras Investigator

Kane Waters is a registered investment advisor. Kane Water conducts business in states that are properly registered or exempt from registration requirements. Registration is not an endorsement of the firm by a securities regulator and does not imply that the adviser has attained any particular level of expertise or competence. For a complete description of Cain Watter’s investment advisory services, please request Form ADV 2A Diversification does not guarantee profits and cannot protect against losses in falling markets. Past performance is not indicative of future results. The past eighteen months have been difficult for musicians for a variety of reasons, but now is a great time to start smart financial planning before travel hits hyper-speed in 2022, and opportunities to make changes to financial plans become increasingly difficult. . is limited. Some musicians are lucky enough to have a team of business managers, attorneys and advisors in their corner to help represent and advise them in building multi-generational wealth, but as you know, this process is time-consuming and often an artist’s fast. There is no latitude to make changes.

Musicians often talk about their desire to organize their estates, establish a foundation, gift money to their heirs, and minimize their tax consequences, but implementing these strategies can be difficult, and it can be confusing how to take the first step. With tax changes on the horizon and some slack in the touring landscape, here’s what musicians can do for the next few months before hitting the road again.

The best way to start is to have a good understanding of your cash flow. Musicians get huge deals every quarter from royalties, ticket and merchandise sales, and even publishing deals. A good strategy is to average the musician’s annual income over the past two years to get an idea of what future income will be.

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Creating a budget, even a preliminary one, will highlight where you can cut some expenses and maximize savings. You may have clients who overspend on things they want, such as hotels and tours, so finding places to divert money is a good start. Once you understand where to save money, explore strategies such as a qualified retirement plan (which protects the musician from taxes), mutual investment accounts, and paying down debt or paying bills. Managers, attorneys and salespeople.

Over time, traditional retirement accounts can accumulate significant values. Keep in mind that although musicians get a tax deduction from these contributions, all withdrawals are subject to ordinary income tax, the 10% early withdrawal penalty and RMDs at age 72.

We’ve historically been in a gross income tax environment, take advantage of it! There is no room for tax increases in the next two decades. When taxes go up, if an artist withdraws from a traditional retirement account, they may end up paying more in the future than they do today. There is a technique called a “Roth conversion” where a person can convert traditional retirement assets into Roth assets today and pay today’s tax rate on the assets, in turn allowing the new Roth account to be tax-free forever. Remember, a Roth IRA or Roth 401(k) allows you to save money after-tax, meaning you don’t get a tax deduction in the year you contribute, but the account is completely tax-free in retirement. A traditional IRA or traditional 401(k) allows you to take a tax deduction for your contributions each year, but then you join Uncle Sam.

Your 8 Most Vexing Tax Questions, Answered

You have two options when converting your traditional assets to Roth assets; Either pay tax out of pocket at the time of conversion, or tax is not deducted from the account at the time of conversion, so you don’t have to dip into your own funds to cover the tax.

When you invest in stocks, ETFs, cryptocurrencies, and other assets, you can make capital gains if you benefit from growth. Capital gains are considered short-term or long-term. Short-term gains are always taxed like ordinary income, but long-term gains are taxed at a lower rate than ordinary income and benefit from a reduced tax rate. It’s all about change. One should consider the current LTCG rates before increasing the asset value to pay long-term capital gains. Currently, the maximum rate of LTCG is 23.8%.

LTCG may go up to 43.4% in 2022 and beyond. So if you have a high-value asset sitting on it, why pay 23.8% today when you’re paying 43.4% down the road? Sell these assets, pay taxes and reinvest the income into capital.

Tax Deductions For Event Pros

The music industry is the poster child for poor estate planning. Every time we lose a famous artist, it’s almost inevitable that a month later they find out they’re dead in the gut, and families sue each other over the artists’ assets and IP rights. Paying an estate planning attorney is like paying to renovate your roof, it’s not sexy, but it’s important to keep your “house” in order. Sure, it might cost an artist $10,000 to put together a smart estate plan, but the pain and suffering it will save loved ones down the road is immeasurable. An attorney will draft living wills, durable powers of attorney and last wills and testaments, including trust documents such as revocable trusts and/or irrevocable trusts.

Everyone has different considerations when putting together an estate plan: do their children need a trustee to manage their assets because they are under the legal age to manage their own money, do they have friends, family or exes to care for? pay off your debts? There are hundreds of different things to consider and a good estate planning attorney will ask the right questions to ensure a proper plan.

Charitable/charitable giving serves several purposes, the most important of which are tax collection, personal morals and ethics. From a net tax perspective, a person can make charitable and charitable contributions (donations) in the year the gift is made, which reduces the tax impact.

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