What Do I Need to Do Before Selling Art Tax Wise?

Tax season. Cue a collective groan.

Are you lot set to file your taxes or have you put it off to the very terminal minute?

With the dreaded filing deadline inching closer each day, it'due south important to remember that cipher helps more than keeping all of your fiscal records organized throughout the year. This includes knowing where all of your sources of income are generated and where your money is going—and then can get a improve understanding of your net income.

Taxes are complicated and particularly complicated for artists. You take a lot of unlike income sources and a lot of unlike expenses. You lot might exist wondering what you can write off—what counts and what doesn't?

Don't worry, nosotros are hither for you.

Whether you are looking to save with common taxation deductions for artists, desire to know if yous qualify for deductions, or simply want financial insights you can employ to strategize for success, take a await at the principal categories of expenses that y'all can track in Artwork Annal for your art business organisation.

Do you qualify every bit an art business for deductions?

When it comes to deciding if you demand to file taxes equally an artist, the IRS draws the line betwixt whether y'all define your practice as a "hobby," or a "business."

Quite simply, your art practice is defined as a business if you have the intention to sell your work regularly for profit and a hobby is done without financial incentive. If you run your studio for turn a profit, you can deduct business concern expenses. Still, if your art practise is a hobby, you practise not qualify to deduct your art expenses from a different income stream on your taxes. and if your practice is not for turn a profit, you cannot qualify your losses to get-go another income.

How else can you determine if you qualify to deduct your expenses?

Ask yourself these questions equally posed by the IRS:

Do you put fourth dimension and effort into your fine art-making practice with the intention of selling the works?

Do you rely on this income to eat and pay rent?

If you lose coin doing this activity, was it inside or beyond your control?

Have you fabricated profits in the by?

Have you changed your practice in society to amend profitability?

Exercise you expect to run into profits in the future?

It's ok if yous don't make a profit every year, but equally a general guideline from the IRS, they want to see a profit three out of 5 years.

Know your business classification

Exercise a little research and decide what type of business construction you want to become. Many artists choose to classify their business as a sole proprietorship considering it'south piece of cake to set upwardly and meets the needs of a basic studio practice.

The procedure varies from state to state, and then head over to your local Clerk of Courts website, your land's Department of Revenue site, and the IRS site to see what steps are required adjacent.

TIP: Start a separate business organisation checking business relationship with your bank. That way, your business and personal expenses aren't all mixed in together when it comes time to do taxes. And, don't forget to save your business receipts!

If you lot are a sole proprietorship you will tape all your sales every bit full general income and you will deduct your expenses.

Artwork Archive'sExpense tracking feature makes bookkeeping & revenue enhancement fourth dimension easy for your art business.

Take a expect at the list of mutual expenses that y'all can deduct as an artist.

Ad

Anything you spend money on promoting your work tin can be deducted. Advertising expenses include print ads, concern cards, fliers, sponsorships, Facebook and digital ads, as well as your website hosting and creation costs.

Business organization Insurance

Simply what it sounds like. If you pay for business concern insurance, keep track of your payments and write them off come revenue enhancement fourth dimension.

Commission & Fees

Paying a gallery to bring in clients and giving them a percentage of sales? Expense that. As well runway any fees related to call-for-entry, applications, legal advice, outsourced accounting, concern consulting as well as model or contractor fees. What counts as a contractor? Anyone y'all pay in society to brand your work. This includes fabricators, photographers, assistants, etc.

Payment processing fees are as well included in this section. If you take payment online through a platform like Paypal, Square, Stripe or Intuit you can expense the processing fees.

Legal & Professional person Services

Our recommendation? Get a professional to assistance yous with your tax training—you can write off their fee!

Materials & Supplies

Brushes, clay, canvases, easels, glaze, tools… anything you use to make your artwork should be recorded equally an expense.

Large Equipment counts as a depreciable asset and is anything that yous will utilize for your art business organisation or studio for more than one year. Call up computers, kilns, cameras and any larger expenses that are used over multiple years. You can write this off all in ane or over many years.

These are substantial expenses. For these larger items, you can report the asset's depreciation as a deductible expense or y'all can merits a larger deduction in the first year.

Meals & Amusement

If you have coffee with a client, have a collaborator out for lunch, or have a dinner with a business partner—these costs tin can all be deducted at 50% as long as the purpose of the meal or event is to talk concern. Keep your receipts, snap a picture, upload them into Artwork Archive, and make annotation of the purpose of the meal.

Office Supplies

Paper, pens, staplers, newspaper clips, folders, fine art for the walls, a mouse for your calculator—you become the point. But don't forget online services such as web hosting, software subscriptions like Artwork Annal, an accounting service, or image services, and annihilation else necessary to go on your online presence and career running.

Cell phone and internet costs tin likewise be recorded. If you apply your cell phone and cyberspace for both business concern and personal use, you can dissever upwardly the monthly charges based on an approximate of how much yous use for your fine art business organisation.

With taxation season correct around the corner, Artwork Annal makes it easy to manage your business organisation expenses.

Professional Development

Professional memberships or any type of dues you lot pay to an art organization, online courses, conferences, books, workshops, or residency fees—anything that tin be used to enhance your career can all be expensed!

Rent & Charter

Pretty straightforward! If you lease role space, studio space or even a storage infinite outside of your home, that monthly fee can be expensed along with any utilities you have to pay forth with it.

For those that accept an art studio in your domicile that is used exclusively for your art business concern or making fine art, y'all can deduct a portion of your monthly overall expenses for that space that will be calculated at the time of filing your taxes.

Repairs & Maintenance

Have an expense related to repairing or maintaining your equipment or role space? Go along rails of the repair costs and fees. For case, if you're a photographer and you send your photographic camera to the shop to get calibrated and cleaned, the maintenance cost should be recorded.

Taxes & Licenses

Business licenses are often required by the state. Yous tin expense that!

Travel Costs

Going out of town to install a show? Traveling to a conference? Paying for airfare or hotel costs? Using a ride-sharing app to get to a gallery? Runway and expense that.

You can also expense $0.58 per mile anytime you use your vehicle to bulldoze to a meeting, pick up supplies, go to an art fair, etc.

NOTE: As ever, we encourage you lot to consult with a tax professional for help with your taxes and this should simply act as a guide to get you started tracking the expenses for your art concern.

Now that you know what to keep runway of, the question is how?

These expenses add up quickly! Merely with the Expense Tracking feature in an fine art management tool like Artwork Annal, you tin can keep track of them with ease.

Bought new paint or business cards? Enter that every bit an expense in Artwork Archive.

Paid an invoice for a portrait model? That expense tin be tied direct to a Contact.

Desire a quick overview of your production, sales, and expenses over time? Only hit up the Insights characteristic!

Plus, with the click of a button, you can go an expense report for any category of your business concern or for any fourth dimension frame. And once expenses are recorded in Artwork Archive, you can easily export them to Quickbooks or whatsoever other accounting software.

It'due south of import to know where your fine art business stands at any point financially, and then you are never caught off guard—revenue enhancement season or not.

Generate sales and expense reports in the click of a button in Artwork Archive.

Easily summate your expenses and sales income in Artwork Archive to get your internet income.

Yous recorded your sales in Artwork Annal. You kept your receipts and uploaded them into the Expenses feature.

If you waited to the end of the year this time, good luck—we've been in that location. It'south less painful to regularly upload your expenses and record your sales, and then y'all aren't stuck with a calendar week of admin tasks. The all-time fourth dimension we find is usually one time at the stop of the calendar month, simply you tin can discover the best time that works for your schedule.

Program for the futurity

Ignorance is elation … except when it comes to your finances. Make sure you are setting aside a portion of your income to pay for your taxes and to invest in IRA if y'all have enough left over.

Y'all can only spend and so long ignoring the money side of your art career before you detect yourself unfulfilled personally, professionally, and financially. The sooner you lot take the guesswork out of your financial situation, the sooner you lot can programme ahead for how you are going to sustain your livelihood. Plus, you'll exist able to set concrete goals for exactly how much you demand to earn and save to cover your expenses.

Necktie up the loose ends

If you are similar about artists making a living from your artwork, you will probably have a few other income sources from your gallery or a side gig. If this is the example, brand certain you get a 1099-MISC from each different income source that you received over $600 annually and file this as along with your sales income.

Consult a professional for advice

In that location are many facets of the art globe, and each 1 has an proficient. If y'all have any questions near filing y'all taxes, always consult a tax expert. It could end up saving y'all money in the long run.

Before consulting an auditor, make certain to have copies of your receipts, invoices, sales reports and expense reports from your Artwork Annal business relationship. These documents will be your get-go resource when assessing your taxation filing.

Prepare to become started? Expense tracking is included on Professional person and Chief plans on Artwork Annal.

Check out this tutorial on setting upwardly your expenses in Artwork Annal.

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Source: https://www.artworkarchive.com/blog/a-short-guide-to-doing-your-taxes-as-an-artist