The Internal Revenue Service offers a palette of eye-catching tax breaks for dedicated artists, including some studio deals. If you sell your art for profit, you could be in line for a write-off. Potential deductions for studio expenses run from rent to materials and supplies. However, your financial picture could get blurry quick if you don't work within the thick lines of IRS deduction rules.
IRS Schedule C
Most artists operate as sole proprietors in the eyes of the IRS. To keep on the tax man's sunny side, set up a simple ledger to track artistic income and expenses. Plan on filing a Schedule C, Profit or Loss from Business, along with your Form 1040 each tax year. If you rent a studio outside the home, deduct your studio rent in the "Rent or lease business property" field. For those painting or slinging ink in a home based studio, take the write off on line 30 of Schedule C. Art materials and studio supplies can also double as deductions.
Home Studio Deduction
If your artist studio is in your spare bedroom, you may not qualify for the deduction. The IRS insists any studio you claim is used exclusively for your art business, and you have to prove that's where you do most of your work. Sure, you can dabble in off site creative pursuits, as long as the home studio is your principal locale for artistic endeavors. You'll need to make those claims on file Form 8829, which is filed along with your annual tax return. The deduction amount is based on just how much of the house is devoted to communing with your artistic muse.
Business or Hobby
The IRS does care if the artist is in a legitimate business or just doing the art as a hobby. If you're in business, they'll at least consider your claim. However, they know too well that it's easy for people to claim to be artists just to get this deduction. So, they do have some rules. The IRS defines a hobbyist as those who fail to make a profit through art in three out of five years. If you're a hobbyist, you can't write off any of your art expenses.
If the IRS audits you, you can use your whole business tool kit as evidence you are too legit to quit. This includes business bank accounts, marketing materials and business ledgers. Any documentation of your professional standing, such as degrees, licenses and membership in art associations, can also stand as reasons you need a studio to stay in business.