The official site for the Detroit Art & Business Institute and Andrea Rosenfeld, professional artist and business consultant to the creative community in metro Detroit and beyond.

How Artists Can Navigate Tax Season and Keep More Money

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How Artists Can Navigate Tax Season and Make More Money

As a creative business advisor and art advocate, my mission is to empower Artists and help them make more money. There are many ways to excel but because it’s tax season I want to talk little bit about how to rise above creative small business struggles especially when it comes to finances. Artists are many things but conservative isn’t how most people describe us. We’re bold and daring in our studios but an Artist who wants to grow their practice has to learn to be conservative with finances. After a sale, instead of running to your favorite supply store, bite the bullet and sock away 10-15% of your total (after sales tax) to reinvest in your business. Jot down a few [business goals] with their costs and determine how much you’ll have to save per month to reach them by the end dates. And while you’re dreaming big, don’t be scared to look at anything that will derail your vision because when you acknowledge a potential challenge you can rise to it.

Not to be the bearer of bad news but as a creative business owner you have to pay Self Employment Tax. In 2016, the self-employment tax rate was 15.3% on the first $118,500 of your net income (net = income after deductions). You MIGHT be exempt from the self-employment tax if your net income is less than $400 but honestly if you’re only earning $400/year from your art business, it’s really just a hobby. To cover this tax, you’ll have to set aside even more money from your sales. Sorry…

If you haven’t created a Limited Liability Corporation (LLC) entity and are still using your personal bank account to run your business, I can offer a few solutions to keep you organized. One idea is to have two credit cards, one for personal and one for business use and keep your business receipts separate. Speaking of receipts, you can use a box if you’d like but however you store them, write notes on each stating what the payment was for. You don’t have to get into intense detail, like “stretcher bars,” “kiln cones,” or “gesso” but instead a general “art supplies” notation is enough.

Creative Taxes 3-Part Video

Here’s an important change in 2018, entertainment expenses will no longer be deductible. The Tax Cuts and Jobs Act eliminated this deduction. That means, starting immediately, client entertainment will not be tax deductible. Meeting a consignment client for coffee to discuss their office sculpture? You can no longer deduct your latte and scone.

Lastly, because creatives aren’t always eligible for bank loans and need alternative funding methods like crowdfunding options, I want to mention that all the money you raise in your campaign may not necessarily be yours to keep. Your crowdfunding initiative is income and when the income happens in a relatively short period of time and your project expenses come later, you may land in a heap of financial trouble. Crowdfunding entrepreneurs need to be extra careful when planning the financial portion of their campaign and will need to know how much of the income they receive to put aside for tax.

Ready to make more money with your art? I invite you to join the hundreds of Artists who’ve moved their business forward with Mind Your Art Business education. I developed this very affordable accelerator for SERIOUS artists who want to end their frustration and increase sales. My deep-dive but easy-to-understand course covers every aspect of your art business and is available, 24/7 for ONLY $30/class!

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~Andrea Rosenfeld
Creative Business Advisor
Schedule your Free Business Boost with me!

YOUR THOUGHTS?  What’s confusing to you when putting your tax documents together?

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