If you are a performing artist such as an actor or a musician, the Canada Revenue Agency has special rules that pertain to you. This article covers all the details and specifies the tax write-offs or expenses(Tax Deductions) that you may be able to deduct from your income. Now that we’ve set the stage, read on…
Employee vs. Self-employed
The first thing that you need to determine is whether you are an employee or self-employed performing artist.
You are generally considered an employee if you are working under a contract of service. That is the case when the person for whom the services are performed has the right to control the amount, the nature, and the management of the work to be done and the manner of doing it.
Alternatively, you are generally considered to be self-employed if you are working under a contract for services. A contract for services exists when a person is engaged to achieve a defined objective and is given all the freedom required to attain the desired result.
It is often difficult to determine whether an individual is an employee or self-employed.
There are indications that an artist is an employee when the engager has:
- The right to decide on or change the size of the group with which the artist performs;
- The right to choose the nature of the artist’s performance without obtaining the artist’ agreement;
- The continuing authority to dictate the time and place of the artist’s performance including rehearsals without obtaining the artist’ agreement;
- The unilateral right to change the dates, times, and places from those ordinarily scheduled, or increase the number of rehearsals or performances;
- The obligation to pay overtime; or
- The responsibility to provide or authorize transportation to the artist.
Indications that an artist could be a self-employed individual carrying on a business occur when the artist:
- Has a chance of profit or risk of loss;
- Provides instruments and other equipment;
- Has a number of engagements with different persons during the course of a year;
- Regularly auditions or makes application for engagements;
- Retains the services of an agent on a continuing basis;
- Can select or hire employees or helpers, fix their salary, direct them or dismiss them;
- Can arrange the time, place, and nature of performances; or
- Is entitled to remuneration that is directly related to particular rehearsals and performances.
What expenses can you deduct if you are a Self-Employed Artist?
The general rule for an expense being deductible is that it reasonable in the circumstances and was incurred for the purpose of earning income.
Examples of deductible expenses for self-employed artists include:
- Insurance premiums on musical instruments and equipment;
- The cost of repairs to instruments and equipment, including the cost of new reeds, strings, pads and accessories;
- Legal and accounting fees;
- Union dues and professional membership dues;
- Agent’s commission;
- Remuneration paid to a substitute or assistant;
- The cost of makeup and hair styling required for public appearances;
- Publicity expenses including the cost of promotional materials and advertising in talent magazines;
- Transportation expenses related to an engagement (including an audition) in the following situations;
- The engagement is out of town,
- A large instrument or equipment must be carried to the engagement,
- Dress clothes must be worn from a residence to the place of the engagement, or
- One engagement follows another so closely that a car or taxi is the only means by which the engagement can be fulfilled.
- The cost of videotaping or recording performances where required for their preparation or presentation;
- Telephone expenses, including an applicable portion of the cost of a telephone in a residence where the number is listed as a business phone;
- The cost of wardrobe used solely for performances;
- Capital cost allowance on instruments, sheet music, scores, scripts, transcriptions, arrangement and equipment;
- The cost of repairs, alterations, and cleaning of clothes for the purpose of their use in self-employment;
- Costs to maintain that part of the artist’s residence used for professional purposes;
- The cost of music, acting or other lessons incurred for a particular role or part or for the general self-improvement in the individual artist’s field; and
- The cost of industry related periodicals.
What expenses can you deduct if you are an Employed Artist?
As an employee, your deductible expenses are more restricted than for a self-employed individual.
As employee earning a salary, you can deduct motor vehicle expenses if you meet all the following conditions:
- You were normally required to work away from your employer’s place of business or in different places;
- Under your contract of employment, you had to pay your own motor vehicle expenses;
- You did not receive a non-taxable allowance for motor vehicle expense.
- You receive from your employer a completed and signed Form T2200, Declaration of Conditions of Employment.
To support your claim for motor vehicle expenses you should maintain a log of your travel for business purposes.
You can deduct supplies that you use directly in your work.
You can also deduct the part of the airtime expense for a cell phone that reasonably relates to earning your employment income.
As an employed artist, Canada Revenue Agency allows you to deduct an additional amount for other employment expenses, but this amount is severely limited. The amount you can claim is limited to the lesser of:
- $1,000; and
- 20% of your employment income from artistic activities;
minus the following amounts you deducted from your income from an artistic activity():
- Musical instrument expenses
- Interest for your motor vehicle; and
- Capital cost allowance for your motor vehicle