There was a very interesting article on the Forbes website which explored the point at which the IRS determines your arts career is actually a job and not a hobby.
Since you can deduct job related expenses to a greater degree than hobby related expenses, the distinction is rather important to an artist.
And while a taxpayer may deduct expenses of a trade or business in excess of the profit earned by the business, thus generating a net loss, a hobby may only deduct its expenses to the extent of the profits of the activity; in other words, the hobby cannot generate a net loss.
The article author Tony Nitti, lists the 9 point test that the IRS uses the make the distinction. In the article he discusses a specific case where the IRS was challenging the filing of an artist and provides examples of how each question of the test would be applied in this case.
Later, he talks about how this particular artist’s career met the criteria of each of the test questions.
Something I found notable was that usually in these cases, a person has a steady job and then engages in a side activity which they subsidize with the income from their regular job.
In this artist’s case, she was an artist for about 20 years before she was hired on to the faculty of a college. The IRS was suggesting that her artistic career which preceded the steady job was the hobby.
This is one of the reasons I feel the article is valuable. For a great many practicing artists, this will be the path their career takes. It is only when they have proven their worth after some period of activity that they may be offered work on a consistent basis.
Now I should note, as Nitti does, that the reason the IRS was looking at this artist was because of the types of things she was claiming are expenses. That issue still has to be resolved in a separate hearing. Most artists probably shouldn’t worry about being targeted by the IRS.
The hearing about whether her artistic career was a career or a hobby has been completed. Nitti’s discussion about why her activities met the criteria is an important read. Even though this case addresses the career of a visual artist, it doesn’t take much effort to see how it applies to other disciplines.
Basically, if you keep adequate records, educate yourself about the market, consult with market experts, price your work to make a profit and have an expectation that work you are currently doing (which I suspect would apply to rehearsing and practicing) will eventually make a profit, then you might have a career as an artist!
Obviously it isn’t as simple as that summary so read the article.