The recent changes to the federal tax law have seen a lot of modifications made to existing deductions, deduction limits and other tax write-offs. One change in the 2018 Tax Cuts and Jobs Act is the ability for actors to deduct their expenses. The changes going into effect remove the ability for actors classified as employees to claim expense deductions as they could in the past. If you work in the acting or performing arts field this can have a notable effect on your taxes and increase overall taxes due. What follows is a brief overview of who can still claim deductions and what specifics have changed.
Actors with an Employee Classification
Actors who are classified as employees can no longer claim unreimbursed expenses as an itemized deduction. Such expenses covered a wide variety of areas including travel expenses, agent fees, union dues, education, wardrobe and other related expenses. The current law states that this change is from 2018 to the 2025 tax year barring any changes. Many actors could see their taxes due increase significantly depending on the size of the previous write-offs, and proper planning is strongly advised.
Freelance/ Independent Contractors
Actors classified as independent contractors can still claim unreimbursed expenses on their taxes. If you received income reported on a form 1099, as an independent contractor, these expenses are classified as a business expense and can be claimed in full on Schedule C of your tax return. Unreimbursed expenses can also be claimed in full wherein an actor makes use of a loan-out corporation or has their own corporation of which they are an employee. In such a corporate setup, a production company pays an actor’s corporation for work performed instead of the actor personally. Note that loan-out corporations, due to related expenses and legal complexity, are chiefly used by highly successful actors who can afford the related business and legal costs.
Qualified Performing Artist
If your income is below a certain threshold, you may qualify for a Qualified Performing Artist classification which allows you to write off all your acting expenses as an above line non-itemized deduction. However, the rules to qualify for such an exemption are very exact.
- Your total income must be below $16,000. This includes not only your acting income but also any income you earn from other jobs and your spouse’s income as well if applicable.
- Your business expenses must be at least 10 percent of what you earned from performing.
- You had at least two employers during the year for the purposes of performing.
- You earned at least $200 from any two (or more) acting jobs during the tax year.
When You Need A CPA
The recent tax code changes by the Tax Cuts and Jobs Act will change several aspects of how you file your taxes. Aside from the above changes to performing arts write-offs, there are other changes that may affect deductions you can claim, what you owe, and even what is taxed. When you need experienced CPA assistance in the greater Atlanta area contact Fricke & Associates, LLC today.