Here’s A Tax Loophole Just Songwriters

Guest post from Soundfly’s Flypaper. This article originally appeared on the Royalty Exchange Blog

Most of us songwriters have no idea that there’s a special tax loophole created just for us. For some artists, this change cuts our taxes right in half.

In 2006, Congress lowered the tax rate for songwriters who sell a part of their catalogs. It did this by reclassifying income from the sale of a catalog as “capital gains” instead of “ordinary income.”

Don’t worry, we’re not going to go full tax accountant on you. Here’s the simple explanation of what this means.

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The Importance Of Record-Keeping For A Band

If you’re an active musician who enjoys payment in any way, you’ll probably have to do taxes eventually. Unless you’re giving all of your music and merchandise for free, you may have already missed an important amount of work that could get you in trouble with the government. That’s normal — musicians don’t always think about it, happy their art is finally making back more than what they’re putting in. But eventually, it needs to be addressed.

See, when you have a band, in a lot of ways you are running your own small business. You are selling a product, no matter how much integrity you have in putting it together. And where there’s a profit, there’s taxes to be done and records to be kept. If you don’t get this taken care of, it could ruin your band/music later.

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Are You Treating Your Production Cost Like A Business Would?

One of the best parts of taking your passion project to the next level and treating it as a business is that you are able to take advantages of the tax write off that goes into running your business. Yet many new entrepreneur-musicians struggle to fully benefit from this. Especially shocking given the equipment that goes into production is one of the largest cost to your business. Write that new mixer off baby!

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