I love music. It’s one of the first things my wife noticed about me. In fact, she thought that I might be too musical for her. You know? In hindsight, I get it. I led our congregation at church in singing every week, I initially majored in music, my family regularly attended concerts and symphonies, and I own an array of musical instruments. I personally think all of those things are very cool, but I understand that while she also grew up with music in her life, it just wasn’t to the same degree. But she loves it more now and admires my passion for it. What she might not always love is my frequent temptation to buy a new instrument.
Most musical instruments are costly, at least for anything worth buying. And I already own a flute, a keyboard, saxophones, and a guitar. But at times, I think my financial know-how could help me justify the cost.
If you know at least a little about accounting, your first idea might be to just expense it. But the plain truth is I can’t expense an instrument; I picked the wrong career to justify it in my business. What would an accounting firm need an instrument for? Doesn’t seem very legitimate.
The second issue with expensing a purchase like this is just because you can expense it to the business doesn’t mean it’s free. It’s honestly a pet peeve of mine when people suggest this. Yes, you will decrease your tax bill by buying an instrument or another object and claiming it as an expense for your business, but that doesn't mean you should. If you don’t have the money to buy a piano, expensing it to your business will not make it affordable. I have heard this advice way too much on entrepreneurial videos, so I want to make that clear.
Lastly, though claiming a purchase like this as a business expense may save you some money, it’s not going to be as much as you may think and certainly wouldn’t justify an extraneous purchase of something as expensive as an instrument. If you expense, for example, a guitar, it will save you roughly 15-20% of the price of the guitar, depending on your income. Let’s say you buy this guitar for $1,000, and you earn roughly $120,000 a year as a sole proprietor LLC. Pretty good! Claiming the guitar as a business expense, you would pay $18,207 in federal income tax. But if you paid personally for the guitar, you would pay about $18,360 in federal income tax. That’s a savings of only about $153 (again, a rough estimate).
However, if you legitimately needed the guitar for your guitar-teaching business in which you’re the sole proprietor of the LLC, then the perspective changes. You didn’t just spend $1,000 to save $153, you saved $153 on a purchase you were already going to make. The guitar is basically 15% cheaper because you went through your business.
That all seems nice and simple because we chose an easy hypothetical cost. In reality, there are other factors to consider such as expenses that are greater than the Safe Harbor Rule and depreciation. That is why being careful and purposeful about your purchases with the financial guidance of an accountant can save you a lot of money.
So how do you know if you can make it a business purchase? It really is as simple as answering the question, “Does it have a necessary business purpose?” Does going on that vacation have a business purpose? No, usually not, and just because your spouse is a joint owner does not mean you can claim it as a board meeting and take a deduction. I tell my family and close friends, “If you think you are being smart and skirting the IRS, you probably are not following the rules.”
So are you going to use this guitar to teach? Yes? Then 100% it is a business deduction. What if you are a musician who specializes in oboe and you want to buy a bassoon? Seems likely that could count as a business deduction. The question to ask is what is the bassoon for. Are you planning on teaching with it or performing? Then yes, it is an expense. But what if you buy a guitar and you are an oboe specialist? The question changes: are you going to be teaching guitar? If not, I would not count it.
The answer to the titular question of this post (Can I Justify Getting Another Musical Instrument to the IRS?) is, unfortunately, no for me. I’m just not in the right business to reasonably justify such an expense. But the answer most certainly can be yes for you.
All of this business expensing can be as difficult to figure out as tuning two piccolos. But if done correctly with the help of an accountant, it can help you feel as at peace as a V7 chord resolving. We want you to be safe when dealing with the IRS as you figure out what can and can’t be a business expense. Feel free to reach out; I would love to connect and help you make the correct determination.
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