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Artist Tax Decision Update

Discussion in 'Art Matters & News' started by shayla, Mar 22, 2015.

  1. shayla

    shayla WOW Framer

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  2. josephforthill

    josephforthill MGF, Master Grumble Framer

    Not a tax expert, but this case may not have a very wide application.

    The NYT article linked in this story has a better run down of the issues, which appear to be two: One, as is usual, if you are not considered "in business for profit" (this was typically tested by either a certain ratio of profitable/non profitable years, or explanation for some business such as those with long start-up periods, e.g., horse breeding). The main difference being that if not considered "serious" by the IRS, you can only deduct expenses up to the amount of income, and not use these deductions against other income. So in this case, if she sold 16K worth of art, but had 25K of expenses, she would only be able to offset the art sale income and not take those additional 9K of deductions against her teaching income.

    The second part gets murkier; since art production was a job requirement (although selling was not), the IRS claim is that any expenses incurred should be on her deductions against teaching income as "un-reimbursed employee expense". Probably will get murkier if she was able to use school studio space/time producing art she subsequently sold.

    If this ruling means that anyone selling art on the side, no matter how limited, gets to take tax deductions against their other income, I see people making lots of "painting trips" to Tuscany ahead!

    Nothing tax related gets a simple explanation.
    shayla likes this.
  3. josephforthill

    josephforthill MGF, Master Grumble Framer

    I ended my earlier post too soon, and couldn't edit.

    I think the nuance in this case was that the artistic work was intertwined and integral to her teaching, in effect, that they hired her as an artist, not just a teacher. So someone teaching math at this institution who also does art work on the side would probably not be treated the same way.

    Tax season is such fun; I heard on the radio the other day that military people have to purchase uniform items that are not reimbursed, yet only some will be allowed as deductions. If you can wear it off duty, it is not deductible. Who knew?
    shayla likes this.
  4. Jeff Rodier

    Jeff Rodier SPFG, Supreme Picture Framing God

    I've known professional speakers who do seminars and have custom made suits constructed with no pockets so they can be deductible. A suit with pockets can be worn off stage for personal use but one that is for appearance purposes only can be defended as a business expense.
  5. josephforthill

    josephforthill MGF, Master Grumble Framer

    urban legend is that Johnny Carson did this.
  6. Pat Murphey

    Pat Murphey SPFG, Supreme Picture Framing God

    I doubt that GIs are audited over this. I flew for an airline for 37 years and deducted my uniform costs including overcoats, shirts, and ties that could arguably be worn away from work. Those garments met a required standard. Never had a squawk from the IRS, nor do I know any other pilots that were challenged.
  7. josephforthill

    josephforthill MGF, Master Grumble Framer

    I helped someone with their taxes last year and found deductions they had been taking for years that are not allowable, and their past returns were done professionally. I think you have to either be hit with a random audit, or be pretty blatant before things become an issue. This issue has come up in various forms over the years. Once case was a woman who worked in an expensive boutique where employees were required to wear those clothes. She fought for a deduction on the basis that they were not clothes she would wear outside the store. Don't recall the outcome.

    The radio show speaker had just written a book on the US tax system; apparently the issue is that only items not allowed (by the military) to be worn off duty were deductible.
    shayla likes this.
  8. Randyman

    Randyman Grumbler in Training

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