At one time actors were not allowed into first-class hotels because of their low social status. Today, some actors are treated like gods and earn millions of dollars. If you're an actor, you probably aren't earning millions. But, if you're one of the thousands of actors that earns an income from acting, you need to know about tax deductions.
There are many deductions you can take to reduce your taxable income for the year, and thereby reduce your taxes. These deductions are quite valuable--for example, if you're in the 25% tax bracket, each $100 in deductions saves you $25 in income taxes. It will also usually save you about $15 in self-employment taxes as well.
Actors are typically treated as independent contractors, not employees. This means that for tax purposes, acting is a business. A self-employed actor may deduct any expenses that is:
- directly related to the acting activity
- ordinary and necessary, and
- not lavish or extravagant under the circumstances.
Common deductions by actors include:
Business Travel: Actors often travel out of town, or even out of the country, to work. You may deduct all reasonable expenses you incur when doing so. These expenses include airfare or other transportation costs and hotel or other lodging expenses. But, you may only deduct 50% of the cost of meals when you travel for your acting business. If you plan things right, you can even mix pleasure and business and still get a deduction.
Local Travel Expenses: Local travel may include trips to performances (both as player and observer), rehearsals, acting classes, auditions, and to pick up supplies. You may deduct trips by car or public transportation. If you like record keeping, you can keep track of all your car expenses to figure your annual deduction. But, if you’d rather not keep track of how much you spend for gas, oil, repairs, car washes, and so forth, you can use the standard mileage rate. When you use the standard rate, you only need to keep track of how many miles you drive for business, not how much you spend on your car.
Agent Fees: If you have an agent, as serious actors usually do, you may deduct all the fees your agent charges.
Office Expenses: If you have an office in your home that you use exclusively for your acting business, you may be able to deduct the cost of the home office. This deduction is particularly valuable if you are a renter because it enables you to deduct a portion of your monthly rent, a sizable expense that is ordinarily not deductible.
Depreciation: When you buy property for your acting business that will last more than one year, you may deduct the cost a little at a time over a period of years. This process is called depreciation. Examples of depreciable property often used by actors include video cameras, sound equipment, digital cameras, sound equipment, theater and film books, musical scores, computers, and cell phones. However, you don’t always have to depreciate long term business property. Small businesses have the option of deducting the entire cost of this property in a single year under Internal Revenue Code Section 179 or using bonus depreciation This enables you to get a big deduction in a single year rather than spreading it out over several years.
Supplies: Supplies are items you purchase for your acting business that you use up in less than one year. They include stationery and postage.
Union Dues: Due you pay to belong to Actors Equity or other unions or organizations for actors are deductible.
Education: Acting classes and coaching lessons are deductible.
Promotional expenses: Virtually everything you spend money on to promote yourself as an actor is deductible including photos, videos, websites (including Internet connection costs), listings in professional registries, advertisements in trade publications, and business cards.
Make-up and Hair Care: These expenses are deductible only when incurred directly in connection with a specific job. You can't deduct make-up and hair care undertaken simply to look good.
Wardrobe: If you buy your own wardrobe, you may deduct the cost only if it is not suitable for street wear. For example, you can't deduct the cost of a modern business suit, but you could deduct an ape costume.
Subscriptions: You can deduct the cost of magazine, journal, newsletter, and other subscriptions useful for your acting business. This would include, for example, trade newspapers like Daily Variety.
Legal and Professional Services: You can deduct fees that you pay to attorneys, accountants, consultants, and other professionals if the fees are paid for work related to your acting business.
Insurance: Self-employed people, including actors, are also allowed to deduct 100% of their health insurance premiums from their income taxes. In addition, if you have a home office, you may deduct a portion of your homeowner's insurance.
Meals and Entertainment: The days of the deductible three-martini lunch are pretty much at an end. To deduct the cost of a meal in a restaurant or an entertainment event like baseball game or theater visit, you must have a serious business discussion before, during, or soon after the event. Moreover, you may only deduct 50% of your business meal and entertainment costs.
Home telephone expenses: You get no deduction for a single phone in your home; but you may deduct the cost of long distance phone calls and special phone services you use for business such as call waiting or message center. You may deduct the full cost of a second phone line you use at home for business, including a cell phone.
Tickets for Viewing Films and Plays: Actors need to attend plays and films to keep up with what's going on in their industry. They may also subscribe to services like Netflix and HBO. These costs are deductible as "research." But make sure they are reasonable. It won't look good if you deduct every cent you spend for these items.