Published April 2, 2024 • 5 Min Read
Starting to earn an income from your art is a remarkably fulfilling moment. After all, when your passion can become your paycheque, the future you have dreamed of feels within reach. The flip side is, when you’re making money from your talent, you now have to pay taxes on the income you earn.
Although it may not feel rewarding, filing taxes is a necessary part of working for yourself. While the ins and outs of income tax may be new to you, preparing your taxes doesn’t have to be difficult. There are just a few things to know – these tax tips can help.
Here are five tax tips for emerging artists:
1. Add up all the income you earn
Whether you earn $100 from a local gig or sell an expensive painting, you need to claim any money you make from your art — it all counts towards your income in the eyes of the Canada Revenue Agency (CRA).
It’s a good practice to create an invoice for everything, no matter how big or how small, as this will help you keep track of the income you earn. There are many low-cost accounting platforms that make it easy to create, track and collect payment for invoices — so you don’t have to spend a lot of time away from your art to stay up to date.
In fact, RBC clients get a free trial and 50 per cent discount on Xero — online accounting software that helps small business owners, including self-employed artists, take care of essentials such as invoicing, bill payments, payroll, and bank reconciliation. Learn more about this offer
2. Understand your deductions
While you have to record all your income when you’re self-employed, one of the great benefits is that you can also deduct expenses you incurred to earn that income.
As an artist, it may be hard sometimes to determine what counts as a deduction and what doesn’t. For instance, painting supplies, rent for studio space and production equipment are clearly related to earning an income as an artist and make sense to claim as deductions. But what about attending a gala that was a key networking opportunity? Or taking a potential buyer out for dinner? The lines may become blurred.
When it comes to deductions, the rule of thumb is to use your judgement and include expenses that are “reasonable” to deduct.
The article Understand Common Tax Deductions can help guide you as you determine what counts and what doesn’t. This CRA resource for emerging artists can also help you understand specific deduction rules for artists.
Just remember to keep all your receipts so if you need to show proof of your expenses, you have the back up on hand. A credit card statement won’t cover it — you need to have an itemized receipt showing what the expense was for. A good practice is to take a photo of any relevant receipts, so you always have a record.
3. Register for a GST/ HST number
While you don’t need to pay GST/ HST if you earn less than $30,000 per year, once you do, you need to register for a GST/HST number within 29 days. It’s a good idea to register for your number as you start to earn more, so you don’t have to worry about it later.
It’s easy to register online, and having your account set up in advance will be one less thing to do as your days get busier.
And if you don’t have a business set up yet? You can register your business with Ownr and save money while you’re at it.
4. Consider carrying forward some expenses
It’s worth noting that some expenses may be carried forward to future years. Advertising and travel deductions, for example, have an annual upper limit, so if you max out one year, you may carry some of these costs forward and lower your tax liability in future years — even when you’re staying home and creating new art.
Say you spent one year producing a record and the next year touring to promote it. The year after that, you’re back to writing and producing. You may carry some (or all) of your travel and promotional expenses from Year 2 to lower your tax liability during Year 3.
5. File your taxes (even if you earned no income)
It’s no secret that artists and performers can experience dramatic fluctuations in their income from year to year. But even if you earned no income in 2023, you could still file a zero-income tax return and claim reasonable expenses for the year. For example, if you spent the year writing or training, you may claim related expenses you incurred during that time.
And if you have questions about your taxes, you can contact the CRA once you file your return.
As many emerging artists also have full-time work to pay the bills, keep in mind that you also need to report income you earned as an artist. For instance, if you worked for another company for a few months and earned a T4, you’ll have to add that income to whatever you earned as an artist.
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.
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