Saving on Taxes

One easy way to reduce your tax obligation is for your band to take, or declre, every permissible deduction. The IRS lets musicians deduct ordinary and necessary business expenses. Deducting these expenses from taxable income will reduce the net amount that is subject to taxes. Despite this opportunity to save money on taxes, IRS examiners routinely find that musicians fail to claim expenses. In other words, musicians often pay more taxes than necessary because they don't deduct their costs.

A deduction is an expense or the value of an item that you can subtract from your gross income to determine your taxable income-that is the amount you earn that is subject to taxation. The more deductions you have, the less income tax you pay. Let's say your band earned 10,000 in one year. If your band deducted its expenses of $10,000 that would wipe out all your income, so you would owe no taxes. This simple principle- reducing taxable income through deductions - is a mantra of most businesses, and you should use it in your band's business as well.