Hobbyist, professional musician, or…?

Have you thought about your status as a musician lately?  Are you a hobbyist, a pro, or perhaps something in between?  How you see yourself will have some dramatic implications for yourself and the music scene at large, so ask yourself a few quick questions…

  1.  Have you been paid to play live or for a song you wrote and/or recorded?
  2.  Have you been paid consistently to play live (or record, or write songs)?
  3.  Have you made profit as a musician the past three of five years?
  4.  Is music your primary form of employment?

Were you able to answer “yes” to all of these questions?  If so, congratulations(!) – you are a professional musician.  If not, you are probably a hobbyist.  And that’s…OK.  The vast majority of musicians are hobbyists, just as the vast majority of golfers are hobbyists.

The grey area is when you can pursue a hobby and still receive some income for this thing you love to do.  But make no mistake – you are still a hobbyist.  There are also hobbyist Astronomers, Fishermen, Gardeners, and Storm Chasers. But it’s probably a good thing we don’t have Brain Surgeon hobbyists.

ProOrHobbyist

So now let’s go back to those four questions.  A lot of musicians can say that they have been paid to play, whether live or for a recording on CD Baby.  Being paid “consistently” is a subjective concept, but if you are calling yourself a “Professional” musician, it might behoove you to earn to some form of payment on a weekly basis.  Acid test:  can you pay your mortgage with gig money?

The third question is even trickier and more significant.  Have you made a profit the last three of five years as a musician?  There are a lot of hard and soft costs (business deductions) associated with staying current as a musician.

Here are some hard costs:

Gear that needs to be replaced (strings, reeds, etc.)

Gear that is lost, damaged or stolen

Gas and car mileage

Lessons, to stay up on your craft

PA Rental

And some softer costs:

Being present at a venue for four hours…to play your 45 minute set

New shock absorbers…when the subs, mains and other cabinets ruin your suspension

Hiring a lawyer…when your spouse decides you’re not around enough to handle her/his needs

Hiring a therapist…if substance abuse becomes an unintended consequence of your craft

As you get older, might as well throw in Physical Therapy too…

 

Profit & Loss

All of those hard and soft costs, if deducted properly, could reduce your profit significantly.  If you think honestly, the many costs associated with being a musician might realistically leave you in the red year after year, after year.  And if so, the Federal Government has something to say about this as well.

According to the IRS, your business (band/musician) can be reclassified if it is not an activity engaged in for profit.  To quote them exactly: “Generally, an activity qualifies as a business if it is carried on with the reasonable expectation of earning a profit.”  But if you cannot demonstrate a profit for the last 3 of 5 years, the IRS can re-classify your business as a hobby.

Here are some other questions the IRS asks, if you intend on taking business deductions:

  • Does the time and effort put into the activity indicate an intention to make a profit?
  • Does the taxpayer depend on income from the activity?
  • If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?
  • Has the taxpayer changed methods of operation to improve profitability?
  • Does the taxpayer or his/her advisors have the knowledge needed to carry on the activity as a successful business?
  • Has the taxpayer made a profit in similar activities in the past?
  • Does the activity make a profit in some years?
  • Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?

And now the last question: is music your primary form of employment?  The government can’t penalize you for being a poor business owner.  And if you only made $2 profit last year, that’s still a profit, right?  And…a large number of musicians make less than the Poverty Level (currently $11,880.00 for an individual in the US).  That’s just a reality.  But can you live off of your musical endeavors?  We’ll talk about ways to do that next…

 

Collecting guitars - a hobby within a hobby?
Collecting guitars – a hobby within a hobby?

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