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Being taxed on royalties where the expenses of gaining them were much higher but can't claim them?

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Newbie

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Replies 2

Hello, I am just super confused. I earn over $40k from my day job a year, I've recorded an album (music) and all up with expenses to be able to perform it I've spent around $20k, I've been paid from royalties $7k from live performance and around $1k from album sales so I thought surely if I've spent more to generate the income (royalties, in this case, are the higher revenue ) I will be able to at least claim some of it back or not have to pay some of the tax from the royalties, but I've tried to do the tax every each way and it doesn't let me claim any expenses back but makes me pay a massive tax on royalties... Can someone explain how is this fair? Is there a way around it?

1 ACCEPTED SOLUTION

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Taxicorn

Replies 1

You can claim al your expenses back but they wouldn't come off your normal income, but would be deducted from your "business" income and would be carried forward as a business loss. So your net business income would be a loss of -$12,000

 

Moving forward this loss can be used to offset any future earnings as a performer, or if your performer income exceeds $20,000 claimed outright.

 

You would also qualify for Special Professional Income Averaging.

But this will only be useful in later years.

 

 

 

2 REPLIES 2
Highlighted

Best answer

Taxicorn

Replies 1

You can claim al your expenses back but they wouldn't come off your normal income, but would be deducted from your "business" income and would be carried forward as a business loss. So your net business income would be a loss of -$12,000

 

Moving forward this loss can be used to offset any future earnings as a performer, or if your performer income exceeds $20,000 claimed outright.

 

You would also qualify for Special Professional Income Averaging.

But this will only be useful in later years.

 

 

 

Highlighted

Newbie

Replies 0

Thank you, that's very useful. I was thinking in those frames but when I was doing the tax return it wouldn't let me choose those options so I am getting a music industry accountant to help me this year and maybe I'll have more idea about it next year.

Kindest regards,

Dorothy