<p>Melsmom, I’m not a tax professional but my son is a classical musician with a BM in performance in May '07, and is taking a year off and will apply for grad school in performance for '09.</p>
<p>For the car expenses, if you own the car (not d), and are paying insurance, taxes, gas, mileage any auto expense cannot be claimed by d (or you).</p>
<p>When s was in undergrad, we claimed him as a dependent for IRS purposes, and his self employment income from performing was minimal, was in the form of 1099’s, and even with a part time job and a W-2, he owed no taxes.</p>
<p>This year he had W-2’s from a non-music part time job, W-2’s from a regional pro orchestra (paid chair), and contract studio teaching. He also had 1099 income as a musician for contract teaching and gigs.</p>
<p>We still claimed him as a dependent as we provide more than 50% of his support. Because he took numeous pro auditions requiring travel, attended several summer festivals (air, ground transport, his personal vehicle mileage) he had more than enough offsetting expenses to show his Schedule C bottom line as a loss. This loss could have been used to reduce his W-2 earnings and result in a lower tax liability for him.</p>
<p>We did not choose to take all his deductions against his self employed income, and showed him making a small profit, with a slightly higher tax liability. He still got most of his federal w-2 witholding back.</p>
<p>A couple of points to consider:</p>
<p>-You do not have to take all deductions against se income. Just because it is a legit expense does not mean you have to include it.</p>
<ul>
<li>I say this as the IRS will look at Schedule C losses over a period of time (three-four years) and may decide to consider that income a hobby, and not self employment, and disallow any offseting expenses. You might want to save Schedule C losses for the years she really needs it (after graduating and trying to break-in to the business).</li>
</ul>
<p>-There are specific rules for performing artists in the current laws that do allow for certain professional meals and travel against performing W-2 income as a higher than normal (as being defined as the “typical”) business expense, and requires a seperate form or worksheet.</p>
<p>-This tax thing is extremely tricky, and son’s income has been low enough to not have any major ramifications if I make an error. Personally, I’m going to do his taxes again next year and until he’s out of grad school unless I find his record keeping shoddy, his income from both music and non music high enough for a mistake to be costly (timewise and financially), or the tax code gets more confusing than it already is.</p>
<p>-I’d suggest d start talking to actively performing peers and begin to get a couple of references for names of good performing arts tax preparers/accountants for the future.</p>
<p>Good luck.</p>