Tax season. Cue a collective groan.
Are you ready to file your taxes or have you put it off to the very last minute?
With the dreaded filing deadline inching closer each day, it’s important to remember that nothing helps more than keeping all of your financial records organized throughout the year. This includes knowing where all of your sources of income are generated and where your money is going—so can get a better understanding of your net income.
Taxes are complicated and especially complicated for artists. You have a lot of different income sources and a lot of different expenses. You might be wondering what you can write off—what counts and what doesn’t?
Don’t worry, we are here for you.
Whether you are looking to save with common tax deductions for artists, want to know if you qualify for deductions, or simply want financial insights you can use to strategize for success, take a look at the main categories of expenses that you can track in Artwork Archive for your art business.
Do you qualify as an art business for deductions?
When it comes to deciding if you need to file taxes as an artist, the IRS draws the line between whether you 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 profit, you can deduct business expenses. However, if your art practice is a hobby, you do not qualify to deduct your art expenses from a different income stream on your taxes. and if your practice is not for profit, you cannot qualify your losses to offset another income.
How else can you determine if you qualify to deduct your expenses?
Ask yourself these questions as posed by the IRS:
Do you put time and effort into your art-making practice with the intention of selling the works?
Do you rely on this income to eat and pay rent?
If you lose money doing this activity, was it within or beyond your control?
Have you made profits in the past?
Have you changed your practice in order to improve profitability?
Do you expect to see profits in the future?
It’s ok if you don’t make a profit every year, but as a general guideline from the IRS, they want to see a profit three out of five years.
Know your business classification
Do a little research and decide what type of business structure you want to become. Many artists choose to classify their business as a sole proprietorship because it’s easy to set up and meets the needs of a basic studio practice.
The process varies from state to state, so head over to your local Clerk of Courts website, your state’s Department of Revenue site, and the IRS site to see what steps are required next.
TIP: Start a separate business checking account 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 are a sole proprietorship you will record all your sales as general income and you will deduct your expenses.
Artwork Archive's Expense tracking feature makes bookkeeping & tax time easy for your art business.
Take a look at the list of common expenses that you can deduct as an artist.
Anything you spend money on promoting your work can be deducted. Advertising expenses include print ads, business cards, fliers, sponsorships, Facebook and digital ads, as well as your website hosting and creation costs.
Just what it sounds like. If you pay for business insurance, keep track of your payments and write them off come tax time.
Commission & Fees
Paying a gallery to bring in clients and giving them a percentage of sales? Expense that. Also track any fees related to call-for-entry, applications, legal advice, outsourced bookkeeping, business consulting as well as model or contractor fees. What counts as a contractor? Anyone you pay in order to make your work. This includes fabricators, photographers, assistants, etc.
Payment processing fees are also 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 Services
Our recommendation? Get a professional to help you with your tax preparation—you can write off their fee!
Materials & Supplies
Brushes, clay, canvases, easels, glaze, tools… anything you use to make your artwork should be recorded as an expense.
Large Equipment counts as a depreciable asset and is anything that you will use for your art business or studio for more than one year. Think computers, kilns, cameras and any larger expenses that are used over multiple years. You can write this off all in one or over many years.
These are substantial expenses. For these larger items, you can report the asset’s depreciation as a deductible expense or you can claim a larger deduction in the first year.
Meals & Entertainment
If you have coffee with a client, take a collaborator out for lunch, or have a dinner with a business partner—these costs can all be deducted at 50% as long as the purpose of the meal or event is to talk business. Keep your receipts, snap a picture, upload them into Artwork Archive, and make note of the purpose of the meal.
Paper, pens, staplers, paper clips, folders, art for the walls, a mouse for your computer—you get the point. But don’t forget online services such as web hosting, software subscriptions like Artwork Archive, an accounting service, or image services, and anything else necessary to keep your online presence and career running.
Cell phone and internet costs can also be recorded. If you use your cell phone and internet for both business and personal use, you can split up the monthly charges based on an estimate of how much you use for your art business.
With tax season right around the corner, Artwork Archive makes it easy to manage your business expenses.
Professional memberships or any type of dues you pay to an art organization, online courses, conferences, books, workshops, or residency fees—anything that can be used to enhance your career can all be expensed!
Rent & Lease
Pretty straightforward! If you lease office space, studio space or even a storage space outside of your home, that monthly fee can be expensed along with any utilities you have to pay along with it.
For those that have an art studio in your home that is used exclusively for your art business or making art, you 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 office space? Keep track of the repair costs and fees. For example, if you’re a photographer and you send your 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. You can expense that!
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? Track and expense that.
You can also expense $0.58 per mile anytime you use your vehicle to drive to a meeting, pick up supplies, go to an art fair, etc.
NOTE: As always, we encourage you 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 business.
Now that you know what to keep track of, the question is how?
These expenses add up quickly! But with the Expense Tracking feature in an art management tool like Artwork Archive, you can keep track of them with ease.
Bought new paint or business cards? Enter that as an expense in Artwork Archive.
Paid an invoice for a portrait model? That expense can be tied directly to a Contact.
Want a quick overview of your production, sales, and expenses over time? Just hit up the Insights feature!
Plus, with the click of a button, you can get an expense report for any category of your business or for any time frame. And once expenses are recorded in Artwork Archive, you can easily export them to Quickbooks or any other accounting software.
It’s important to know where your art business stands at any point financially, so you are never caught off guard—tax season or not.
Easily calculate your expenses and sales income in Artwork Archive to get your net income.
You recorded your sales in Artwork Archive. 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 there. It’s less painful to regularly upload your expenses and record your sales, so you aren’t stuck with a week of admin tasks. The best time we find is usually once at the end of the month, but you can find the best time that works for your schedule.
Plan for the future
Ignorance is bliss … 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 you have enough left over.
You can only spend so long ignoring the money side of your art career before you find yourself unfulfilled personally, professionally, and financially. The sooner you take the guesswork out of your financial situation, the sooner you can plan ahead for how you are going to sustain your livelihood. Plus, you’ll be able to set concrete goals for exactly how much you need to earn and save to cover your expenses.
Tie up the loose ends
If you are like most 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 case, make sure 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
There are many facets of the art world, and each one has an expert. If you have any questions about filing you taxes, always consult a tax expert. It could end up saving you money in the long run.
Before consulting an accountant, make sure to have copies of your receipts, invoices, sales reports and expense reports from your Artwork Archive account. These documents will be your first resource when assessing your tax filing.
Ready to get started? Expense tracking is included on Professional and Master plans on Artwork Archive.
Check out this tutorial on setting up your expenses in Artwork Archive.