But not your instruments, equipment or sheet music
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Q: I am a musician but am employed in a mainstream 9-5 job. I play gigs on weekendsand some weeknights. I continue to upgrade my music skills with lessons and purchase musical instruments irregularly. As a musician, what expenses can I deduct, and when do I file?
A: Creative individuals such as musicians, artists and writers are a unique breed: Achieving success and attaining their goals and dreams can require a lot of sacrifice. Some artists work at other non-related jobs and pursue their careers part-time. These individuals require encouragement. What would this world be without art, music or literature?
The Canada Revenue Agency (CRA) recognizes the uniqueness of this industry. At issue and foremost for deductibility for tax purposes is the following question:?“Is the artist’s endeavour, a hobby or a business?” An individual that partakes in the activity solely for personal pleasure without concern for profitability would be considered a hobby, and therefore, no deductions are allowed. An individual that conducts the activity in a “sufficiently commercial manner” for which there is “reasonable expectation of profit” would be considered a business, and all expenses incurred in earning income may be deductible.
An artist may deduct the following expenses from income earned:
- Commissions to agents.
- Travelling and entertainment expenses.
- Professional and union dues.
- Cost of music or acting lessons.
- Repairs to and insurance on musical instruments.
- Legal and accounting fees.
- Remuneration to assistants.
- Home office.
- Advertising and publicity cost.
- Clothing for performances.
- Cost to videotape or record.
- Telephone, cellphones and other forms of communication.
Visit CRA’s website for a more complete list. Items such as musical instruments, sheet music and equipment cannot be deducted but can be used for capital cost allowance (CCA).
Losses in some years are not unusual in the industry and can be deducted against other income on your tax return. Self-employed taxpayers (spouse included) must file their tax return on or before June 15, but taxes owing must be paid by April 30.
Q: I was born in the U.K. but have lived in Canada for more than 40 years. I receive a small pension from the U.K. Must I report this income?
A: Pension income from a foreign country in excess of $1,000 CDN received by a resident of Canada must pay income taxes. Canada has tax conventions with many countries to avoid double taxation. Speak to your tax adviser for further assistance.
Henry Choo Chong, CGA provides accounting and tax services to individuals and businesses in the GTA. He can be reached at 416-590-1728, ext. 304 Any questions to Money Matters should be e-mailed to email@example.com.