George Dunbar at his Bayou Bonfouca studio, 2018. Photo credit: Callan Contemporary. View his Public Profile here.
What can you deduct from your taxes as an artist?
Perhaps you were sitting at lunch with your art mentor when you heard it the first time—“Don’t worry, I’m deducting this” they said, reaching for the check. "What wizardry is this," you thought, but you didn’t ask too many questions about your free lunch.
"When I am a professional artist I will deduct things too," you made a mental note. But now that it’s tax time, what does deducting stuff mean?
And, what can you deduct anyway?
First off, when small business owners talk about deducting things, they are referring to business expenses you can include on a Schedule C, which is your business’s profit and loss statement for the year. Throughout the year, you need to keep good records not just of your income but of all the expenses that go into running your art business. Today we’re going to focus on those expenses and how to account for them.
The Basics of a Schedule C as an Artist
What are the main things visual artists deduct on the Schedule C?
Here’s a pretty comprehensive list of the kinds of expenses you can track all year and then deduct from your profit on your Schedule C:
- Commissions paid to employees or people you hire for help
- Equipment used in your trade, including computer, phone and cameras
- Supplies and materials
- Legal and accounting fees or services
- Studio rent and expenses
- Utilities, including phone/Internet
- Entertainment and meals related to your business
- Business fees such as your tax preparation software/accountant
- Equipment rental
- Publications, periodicals, and other research materials
- Fees for workshops, seminars and applications
- Membership or association dues
- Shipping or mailing
- Repairs or maintenance
- Documentation, framing of work
You can learn more about what is included in each category in this guide artist's guide to tax deductions.
Wow, that’s a lot of stuff! So I can deduct my gym membership and vacation to Hawai’i?
Not so fast. If you were ever audited by the IRS you would need to prove that you incurred your expenses as a result of doing business and in an effort to eventually make money.
That’s why you can deduct 50% of meals eaten as takeout for 2022 and 100% of meals consumed in restaurants according to H&R Block—those should be meals with other people where you were talking about a project or networking. You really shouldn’t deduct a gym membership unless you could explain that your physical fitness was part of an art project and even then, that might be a bit iffy. You can deduct the cost of documented research trips related to work or trips you made to support or create work such as traveling to Miami to be present at the art fair you are exhibiting at.
Can I deduct a portion of my home as a dedicated art studio space?
This is considered by the IRS as a home office deduction. Calculate or find the total square footage of both your home and your art studio space and include what you pay for that percentage on your schedule C.
For example, my home studio is 16% of my house. So I take 16% of my total mortgage payments for the year and note that on my Schedule C. I also deduct 16% of my electric and water bills.
Rent for a studio outside your home is fully deductible according to Nolo.
Is a private art school something that can be considered deductible? What about other educational costs?
Possibly. TurboTax has a longer explanation but there are some eligibility requirements related to the American Opportunity Tax Credit, but it is possible to apply the cost of college tuition in some circumstances. Other educational costs such as a workshop, training or certificate training are deductible if they are pursued to gain skills that will advance your business. So you can deduct a ceramics workshop but probably not a weekend seminar on the ethics of RuPaul’s Drag race. Unless the seminar is research for a new body of work. then deduct it, baby!
Do reimbursements count as income for an art business?
For example, if a gallery reimburses me for materials I purchased to make work for their show, is that reimbursement counted as income? Do I claim those materials as expenses or not?
Once again, it depends on your individual circumstances. In the example above, you don’t want to claim things twice. So if you were paid back for an expense, you wouldn’t want to still claim it– you were fully reimbursed. However, if you’re an art educator and the reimbursed expense got included with your other wages from the college or university where you work on your W-2, then you would want to claim it because you are likely getting taxed on that money as income according to Kent State University.
What about deducting grants, art prizes or gifts?
Are grants and scholarships ever non-taxable? I’ve been told by a foundation that the grant they awarded me was not taxable but my accountant said it is.
While you are an enrolled college student, scholarships and grants are not taxed according to H&R Block. Specifically, they explain that tuition and enrollment fees as well as textbooks, supplies, and equipment (including computers!) are not taxed for students. If you receive an award to cover these kinds of expenses, you don’t need to include it in your income because you will not be taxed for it.
Most grants, however, are taxed in the United States. This includes grants from the federal government or your individual state’s art council. The exceptions are Fulbright awards, Pell grants, and Title IV affiliated grants. The entity that gave you the grant should mail you a 1040 with the amount noted on it for you to file with the rest of your taxes.
What about other financial windfalls or gifts?
Say you inherit a house or asset while self-employed, do you owe taxes on the asset?
Possibly. Inheritance is not considered income by the federal government but earnings on assets are considered income and are taxed. If you inherit a house and sell it for a large profit, you will be taxed on the profit. If you inherit a stock portfolio and make money on those stocks, you will owe taxes to the federal government and most likely your state.
One way to protect yourself from owing a lot in taxes is to place the money into a trust while the person giving it to you is still alive. According to TurboTax, this ensures that you won't get hit multiple times for taxes on the same asset. Another strategy is making strategic charitable contributions to offset your potential earnings on your asset and make sure you don’t get bumped into a higher tax bracket.
As we continue our tax series, we’re looking at sales taxes and how those play a role in your end-of-the-year taxes.
Suzy Kopf is a multidisciplinary artist, college educator and arts writer. She has been an invited speaker on career development topics at the College Art Association, The CUE Art Foundation, Artists Thrive Conference, and the Maryland State Art Council, among others. She is a regular contributing writer for BmoreArt, as well as Baltimore Magazine, Johns Hopkins Magazine and the Baltimore Museum of Art and specializes in profiles on creatives, art business practice and exhibition reviews. Her work has been shown throughout the US and Canada and she has been the recipient of numerous residency fellowships including Kala, The Studios at Mass MoCA, Playa and VCCA.