Tax Breaks for Bands

Thanks to the Tax Relief Act of 2010 and Jobs Act of 2010 and other stimulus bills passed in the last couple of years, bands have some pretty advantageous tax benefits. Namely, you can currently take depreciating equipment and write 100% of it off in full this year, as long as you buy it new and put it “into service” in this year. In years past, you could only deduct the actual depreciating value.

Section 179 can be used for vehicles, musical instruments, computers, tablets, cell phones, commercial computer software, and pretty much any other gear you can think of. (Note that for computers, tablets, cell phones, etc. if you mix between business and personal use, you can only claim the percentage used for business purposes — even though you can easily claim that what most people what perceive as personal use, as an artist, is actually business use because you’re “marketing yourself” as an artist and “networking.”)

Perhaps the most helpful part of Section 179 is that it can be used for your tour van or vehicle. There is a bonus depreciation limit of $11,160 for trucks and vans, but there is also an exception to that limit for “transport vans, and other vehicle used to specifically transport people or property for hire,” meaning your band can claim the full 100%. Both new and used vans qualify (as long as it’s new to you), and you can still claim the full value even if you’ve financed the vehicle and put no money down. So if you buy a van this December with financing and place it “in service” by driving yourself to a show or practice in it before December 31st, you can claim the full value and use that towards paying off the financing almost immediately.

You can claim benefits for depreciation using Form 4562 (pdf link), which then gets carried over to your Schedule C. Of course, you should always seek advice from a qualified tax professional who can help you with Section 179 deductions as well as a wealth of other credits due to you. Make sure you’re using these credits to your full advantage — that’s what they’re there for.