How to Claim the Qualified Performing Artists Tax Deduction
The deduction is an adjustment to income so it escaped tax reform
Performing artists who work as employees used to have two options for claiming job-related expenses as a tax deduction. They could take an itemized deduction to claim job expenses for W-2 income, or they could claim an above-the-line adjustment to income. Unfortunately, tax reform eliminated the itemized deduction when the Tax Cuts and Jobs Act (TCJA) went into effect in 2018. Some artists can still claim the adjustment to income, however.
This change affects only employees, not independent contractors. You can still claim your expenses on Schedule C if you're self-employed, subject to certain rules.
The Eliminated Miscellaneous Deduction
Job-related expenses were normally one of the miscellaneous itemized tax deductions that were subject to a 2% floor. You could only claim a deduction for the portion of your job-related expenses that exceeded 2% of your AGI and that were not reimbursed by your employer
For example, your itemized deduction would have been $8,800 if your AGI was $60,000 and your job-related expenses added up to $10,000: 2% of $60,000 works out to $1,200 and you could only claim the portion of your expenses that exceeded this amount.
This provision has eliminated from the tax code by the TCJA from 2018 through 2025 when the law potentially "sunsets" or expires. It can continue, however, if some or all of the TCJA terms are renewed.
The Above-the-Line Adjustment to Income
The good news is that the "above-the-line deduction" on the Form 1040 tax return is still alive and well. It remains unaffected by the TCJA, and these adjustments to income are actually more tax-favorable than itemized deductions. You don't have to itemize in order to claim them, and they reduce your adjusted gross income (AGI), a factor upon which many other tax perks are based.
Taxpayers can claim adjustments to income and itemized deductions or the standard deduction as well.
The following professions qualify for this above-the-line deduction for job-related expenses as of tax year 2019:
- Performing artists
- National Guard or Reserve members
- Fee-based government officials
The bad news is that not all artists will qualify because the terms are rather strict.
Performing artists qualify if they provide services in the arts for two or more employers and receive at least $200 in wages from those jobs. Your job-related expenses must be more than 10% of the income you earned from these jobs, and your AGI must $16,000 or less—without regard to this deduction—as of the 2019 tax year, the return you'll file in 2020.
You can't claim this deduction if you're married and file a separate return unless you lived apart from your spouse throughout the entire tax year.
National Guard, Reservists and Fee-Based Officials
You'll also qualify for the adjustment to income if you were a member of the Reserve of the Air Force, Army, Coast Guard, Marine Corps, Navy, Army National Guard, Air National Guard, or Public Health Service Reserve Corps. You can deduct expenses for traveling more than 100 miles from your main home. Your deductible expenses are limited to the federal per diem rates for the city you're traveling to.
Your job-related expenses are also deductible if you were a government official who was compensated entirely or partly on a fee basis.
How to Claim the Adjustment to Income
You can claim the above-the-line adjustment to income on IRS Form 2106, "Employee Business Expenses" to be submitted with your Form 1040 tax return. You must then transfer the amount that appears on line 10 of Form 2106 to line 11 of the 2019 Schedule 1, "Additional Income and Adjustments to Income."
The total from Schedule 1 is then entered on line 8a of the 2019 Form 1040.
The IRS has changed Form 1040 twice since 2017, and the changes are significant. These lines and instructions do not apply to tax years 2017 and earlier.
The tax deduction for certain job-related expenses can be found in Internal Revenue Code Section 62.
- Qualified Performing Artist: IRC 62(b).
- National Guard or Reservist: IRC 62(a)(2)(E).
- Fee-Based Government Officials: IRC 62(a)(2)(C).
It's Not Too Late
It's not too late to go back and amend your 2017 tax return if you missed claiming the miscellaneous itemized deduction. You're running out of time, however. The IRS says you can amend a return for up to three years after you file your original return, or up to two years after you paid any tax due on that return, whichever is later.
Your 2017 tax return would have been due in April 2018, so you have until April 2021 to amend that return.
Assuming you filed your 2017 tax return in April 2018, you would have until April 2021 to go back and amend it using Form 1040X. You would have until April 2020 to amend a 2016 return filed in 2017.
If You're Self-Employed
You haven't lost any deductions if you're not an employee. Your expenses are the cost of doing business, and these remain deductible after passage of the TCJA. They're just reported and claimed differently.
You're an independent contractor if you receive Form 1099-MISC from those you perform work for rather than a Form W-2.
You would deduct your expenses on Schedule C, "Profit or Loss From Business" in this case. You don't have to meet the stringent rules for qualifying as a performing artist.
Keep receipts so you can prove your expenses if necessary. As of 2019, some qualifying expenses include:
- Manager, agent, attorney, or personal assistant fees
- Travel expenses
- Promotional expenses
- Costs of clothing, makeup, or costumes that aren't suitable for everyday use
- Educational expenses related to your profession
This list is not inclusive.
Speak with a tax professional if you're not sure whether you're an independent contractor or an employee. It can be difficult to make the distinction in this profession. There's a chance that you're an employee—even if you think you're not—if you accept work through the Screen Actors Guild, Actor's Equity, or the American Federation of Television and Radio Artists.
Tax Treatment of "Loan-Out" Corporations
A personal service or "loan-out" corporation provides yet another tax option for performing artists, but these entities generally aren't feasible for any but the most successful performers. The corporation is formed to effectively sell the services of one or more entertainers. It pays the entertainers as employees, then claims their expenses as a business tax deduction.
IRS. "2019 Instructions for Form 2106," Page 4. Accessed Jan. 20, 2020.
IRS. "Instructions for Form 1040X," Page 3. Accessed Jan. 21, 2020.
IRS. "2019 Instructions for Schedule C," Page 6. Accessed Jan. 20, 2020.
Duke Law School. "The Loan-Out Corporation in Tax Planning for Entertainers," Pages 1, 52-53. Accessed Jan. 20, 2020.