Tax season is approaching. Whether you are doing your taxes on your own or hiring a professional make sure to look into all potential saving available to you as an artist. Here are some key links to help you navigate these tax saving programs.
Bursaries and Grants
Receiving grants and/or bursaries also affects your income tax. The scholarship exemption lets you exclude the first $500 of total scholarships, fellowships, bursaries and prizes that have been included in computing your income in a given tax year.
Awards for the production of a literary, dramatic, musical or artistic work
3.98 Paragraph 56(3)(b) permits a taxpayer to exclude from income an amount relating to a scholarship, fellowship, bursary or prize that is to be used by the taxpayer in the production of a literary, dramatic, musical or artistic work (this is commonly referred to as the art production grant exemption). In order for the art production grant exemption to apply, the amount of the grant must be used in computing the taxpayer’s income under subparagraph 56(1)(n)(i).
3.99 The art production grant exemption is calculated as the total amount of reasonable expenses (see ¶3.100) incurred in the year to fulfill the conditions of receiving each art production grant, up to, but not exceeding, the total amount of each grant that is used in computing the taxpayer’s income under subparagraph 56(1)(n)(i). As discussed in ¶3.77 in relation to research expenses, expenses incurred in the immediately preceding or the immediately following year may also qualify.
3.100 The amount of reasonable expenses cannot include:
- personal or living expenses of the taxpayer (other than expenses of travel, meals and lodging incurred by the taxpayer in the course of fulfilling the conditions of each art production grant and while absent from the taxpayer’s usual place of residence for the period to which the art production grant relates);
- expenses for which the taxpayer is entitled to be reimbursed;
- expenses that are otherwise deductible in computing the taxpayer’s income; or
- travelling expenses relating to his or her spouse, common–law partner, children or other third parties.
Employment and Expenses
Expenses can be an important factor in determining an artist’s tax obligations. You may be able deduct the costs of creating a work of art in the year the costs are incurred, rather than in a later year when the art is sold. Doing so may allow for an immediate benefit on your current tax year by reducing income tax.
You can deduct expenses you paid in 2016 to earn employment income from an artistic activity if you did any of the following:
- composed a dramatic, musical, or literary work;
- performed as an actor, dancer, singer, or musician in a dramatic or musical work;
- performed an artistic activity as a member of a professional artists’ association that the Minister of Canadian Heritage has certified; or
- created a painting, print, etching, drawing, sculpture, or similar work of art. For income tax purposes, it is not an artistic activity when you reproduce these items.