View Full Version : Depreciation on music equipment for tax purposes

09-15-2002, 10:19 PM
According to the IRS, over how many years do I have to depreciate my musical equipment? Is it two years? Any info would be appreciated, thanks.


09-15-2002, 10:52 PM
I've always opted for the "one time" deduction. That is allowed in certain cases, and my Turbo Tax has always allowed it (based on my descriptions and the listed restrictions).

But if I'm wrong, and you work for the IRS, my name is Dave Froker, I live in Daly City, CA, my social security number is... images/icons/grin.gif

09-16-2002, 06:58 AM
It is my understanding, as explained by my accountant, that the IRS tax code allows ANY business to EXPENSE upto $20,000 per year. To EXPENSE an item means that the total value of that item is deducted from taxable revenues of the current year. So this is the one-time deduction.

The other option is depreciation, where the value of the equipent is deducted from taxable revenues over the "life of the equipment." IRS has many rules to determine if a piece of equipment qualifies for 3,5,9 years deduction schedules. Usually, shorter is better. Certain items do not qualify for expensing, including vehicles and real estate purchases; they must use depreciation.

EXPENSING is a real windfall for small business owners. I use expensing for computers and a lot of electronic equipment, but I am not in the audio business. Howerer, audio people should be able to expense computers, samplers, software, and PT HD systems, Digi 002s, or what not, upto $20,000 per year. After your $20,000 expense credit is used, then you must use the more common depreciation method, or expense the remaining portion in the following year.

da BaSsTaRd!
09-16-2002, 07:09 AM
working musicians can deduct 100% of their equipment purchases on schedule C up to a limit of $??,000 (its high - something like $25,000).

i doubt that technically this would apply to recording studios, but you could claim that you're a label. a label can be considered the same as a working musician (label + musician working toward a common goal makes them extremely similar). in that case, you can use the deduction. if you get audited, you need to show a) what percentage of your income came from label vs. regular customers and b) you should show some revenue for your label (as opposed to income - you can have revenue and still show a loss).

09-16-2002, 09:23 AM
Well, DaBaSsTaRd, my numbers were just a bit off. Any business, either Sole Propritor, Corporation or Partnership, as well as a “Self-Employed” person can claim the Expense deduction as follows:
Tax Year 2000 $20,000
Tear Year 2001-2 $24,000
Tax Year 2003 $25,000

These numbers have been changing upward almost every year for the past 10 years. Schedule C is the tax form for Self Employment, which would include working musicians. A Label would normally be organized as a Corporation, a Sole Proprietor, or a Partnership and also would qualify for the deduction. However, the self-employed person or the business must have revenues equal to or greater than the expense deduction, which is the main issue.

So even a working musician who files a Schedule C Self-Employment form can expense up to $24,000 in equipment per year and every year, provided he has $24,000 in taxable revenues every year. This is just general tax information, for specific tax advice, you best visit an accountant.

09-16-2002, 01:39 PM
Originally posted by VincePro:

So what deduction schedule do most samplers, synths, etc.. fall under?? Thanks!

Vince<font size="2" face="Verdana, Arial">Well, I didn't know, but my accountant provided an answer. He advised me that a self-employed musician should fill out a Schedule C, along with a form 4562 (Depreciation); line 2 is where the equipment is expensed. The claimed equipment would also have to be listed below that.

Disclaimer: As mentioned earlier, this is just general tax info. For tax advice, you should consult an accountant.

09-17-2002, 12:54 AM

So what deduction schedule do most samplers, synths, etc.. fall under?? Thanks!