S3E14 - Taxes for Producers
📘 Get my FREE Beatmaking book: https://itsGratuiTous.com/pod/5keys/— — — — —DISCLAIMER: Do not listen to this as financial advice.. hire a professional tax advisor for your business and income strategy.Are you running your online business as a producer, and now have to deal with taxes?https://itsGratuiTous.com/how-to-become-a-music-producer/You may think hiring it out is the easiest solution, but depending on how complex your business is, taxes can be kind of easy.. you just have to know some basic tax fundamentals for music producers.It’s important to note there’s different tax rules depending on your industry, and what you’re selling..How Taxes Work for Producers (The Basics)The sad thing is.. taxes aren’t taught at all in elementary school, or even high-school!I’ll break down some producer tax fundamentals to get you going on basic tax terms:Gross Income (Monies Received)When you make income, this is known as Gross Income.It’s monies received when people purchase your products.. like FL Studio Courses, or FL Studio Books BEFORE any deductions.https://itsGratuiTous.com/product-category/courses/https://itsGratuiTous.com/product-category/books/Deductions, Write-Offs, and Expenses (for Producers)An expense allows you to reduce your income and pay less tax! But you have to be very careful and honest when reducing your income with expenses (an example is below).Some expenses are a 100% write-off, while some items are not (like a new music computer!).Items that are not 100% write-off, we call Depreciation, and these items are written-off over time.When working a normal job, there’s little flexibility with taxes.. you go to work, collect paycheck, and go home.. You’re then given a tax slip at the end of the year to report on your personal taxes (it’s pretty straightforward because your company figures out all your income, fees, expenses, and taxes paid!).But.. when running an online production business, we have the benefit of Deductions, Write-Offs, and Expenses which allow you to reduce your income from any equipment and expenses to run your business, meaning you pay less tax!https://itsGratuiTous.com/how-to-become-a-music-producer/Deductions are a huge business advantage compared to personal taxes.Net Income (What You Pay Tax On)Net Income is the difference between Gross Income minus Expenses. (Net Income is what you pay your taxes on, but you have to show all your work along the way).Let’s give an example now:We make $1,000 this year (Gross Income).We buy light bulbs for our music studio for $50 (Expense).We’re left with $950! (Net Income)For many small items, we’re able to 100% write them off, and the whole income and expenses for producers is pretty easy..What gets tricky is when you start acquiring music equipment like computers and speakers.. as they’re not 100% write-offs.https://itsGratuiTous.com/category/music-production-equipment/We this call depreciation.. in short, certain equipment is put into a “tax class”, which has a percentage.Let’s say we buy a computer for $750, and its tax class is 20%.We’d only write-off $150 each year until the $750 runs out!Here’s a basic tax depreciation example FOR THE FIRST YEAR:Gross Income is $1,000Computer costs $750Computer tax class is 20% (for example).$750 x 20% = $150We’d then go:$1000 (Gross Income) – $150 (Computer Expense)Net Income = $850It’s recommended to use a tax software which tracks your last year’s expenses, as it will carry over these deductions for you, and you simply keep applying the deduction until it runs out.How to Manage Taxes for ProducersBe on the lookout for a new beatmaking course about managing money for producers.https://itsGratuiTous.com/courses/It will break down how to manage your money as a producer, how taxes work at a basic level, and how to set up a tax spreadsheet to make managing your income and expenses pretty straightforward.. you just have to remain consistent updating it, then your taxes go really fast each year.In short, you have Gross Income, Expenses, and Net Income.Gross Income is all income collected that year.Expenses are the cost of running your business.. something like a domain renewal would be a 100% write-off, but buying a new MIDI Keyboard would not be.https://itsGratuiTous.com/category/midi-keyboard/Net Income is your taxable income after deductions (make sure you are able to show all your work in case you get audited.)Remember, most governments give business owners a huge advantage of being able to write-off deductions on your taxes.This ultimately reduces your Net Income, which means you pay less tax, and get the benefit of purchasing new equipment to help grow and advance your business.Play by the rules, and you’ll be good to go!— — — — —🔗 EPISODE RESOURCES:Online Music Distribution Course [RELEASED!]https://itsGratuiTous.com/product/online-music-distribution-course/— — — — —🌐 Visit the website: https://itsGratuiTous.com/pod/website/🎧 Get podcast updates: https://itsGratuiTous.com/pod/updates/
