A Tax Professional Explains the HITS Act for Musicians

The HITS Act lets you take 100% of your recording expenses in the year you spend it instead of making you slowly take those expenses over many years. But there’s a lot more you need to know… In this article, Edy Blu, a seasoned artist, music educator, and tax advisor at Brass Taxes, breaks it all down. With a decade of experience as a coach and teacher, plus six years in accounting and tax, she brings a unique perspective that blends creative and financial know-how to help artists understand exactly how this bill could impact their bottom line. Here’s everything you need to know…

A Tax Professional Explains the HITS Act for Musicians

What Is the HITS Act, and Why Should You Care?

There’s a lot more to making music than just the creative part, so let’s dive deeper into something that affects us all: taxes! As a musician and tax advisor, I’m here to hold your hand through this complicated subject.

You’ve probably seen some posts about the HITS Act, which recently got signed into law and directly affects independent musicians, producers, and record labels. But before we get into this change to the tax code, let’s zoom out and examine how to file taxes when we’re out here spending money on our craft and trying to make it.

You’re trying to make money, right? That’s the first signal to the IRS that you are a business and not a hobbyist. If music is your hobby, and you have no goals of making money, you can only take expenses up to the amount of money you were paid for making music; you can’t incur a loss. So now that we’re all here to make money and a profit, let’s talk about how the income you make and the expenses you have in your music career interact with your tax form.

Profit & Loss 101: What It Means and Why It Matters

Ever heard of a profit and loss statement? It helps you determine whether you made or lost money in a given time period. At tax time, this shows up as your Schedule C. It tells the IRS whether you owe taxes on your profit or if you took a loss that could offset other income.

How does the HITS Act change things? If you’ve made it this far, you’re probably thinking about all the ways you spend money on your music career. The HITS Act specifically applies to expenses related to creating a new sound recording here in the U.S. This could include things like paying session musicians, renting studio time, hiring a producer or engineer, or buying new equipment for your home studio to finish the project.

Basically, you’re creating something valuable (an asset), and before the HITS Act, the IRS required you to spread out the cost of that asset over several years. So, if you spent $10,000 this year on your project, you could only deduct a portion of that amount each year for 4 to 5 years.

Yes, music lasts forever, but for tax purposes, the IRS treats it as having a “shelf life.” With the HITS Act now in place, you can deduct the entire $10,000 expense in the same year you spend it. This lowers your taxable income right away, making your taxes reflect your actual financial situation more accurately.

What Can You Actually Deduct?

The IRS has specific categories for deductible expenses. Common ones for musicians include:

• Studio equipment and plug-ins
• Digital audio workstations (DAWs)
• Instrument repairs and supplies
• Mileage to gigs and rehearsals
• Renting studio space
• Paying collaborators
• Courses or coaching for professional growth

(Note: This isn’t an exhaustive list, so definitely talk to a tax advisor about your unique situation.)

Track Your Money Like a Pro

The last thing I want to touch on is tracking and documenting your income and expenses. The most important part? Find a system that works for you. I personally love spreadsheets, and I use the Brass Taxes Expense Tracker. There are also plenty of apps if that’s more your style.

Check in regularly (at least once a month) so you’re not overwhelmed come tax time. Remember, we’re trying to make money. You can’t measure your progress if you’re not looking at your numbers.

Final Thoughts

Looking at your finances might feel intimidating at first, but it can also be one of the most empowering things you do for your career. If you’re ready to dig deeper into your own situation, book a consultation or tax appointment with me or one of the incredible folks at Brass Taxes. (All of us have lived the freelance life, so we get it.)

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