Tax question: best way to deduct new instrument purchase?

Edited: October 14, 2021, 1:25 PM · Hi all,

I'm currently in the process of purchasing an instrument (not antique), and have taken out a loan to help cover the cost. I am a professional player and teacher who will use this instrument for business almost everyday. Some tax questions:

Is the loan money I just received "business income"? Will I need to claim the amount I borrowed as income on my Schedule C for this year?

Is there any method besides depreciation for me to spread out the cost of this instrument over several tax years? For example, since I have taken out a 5 year loan, can I consider my monthly loan payments as business expenses? It would be complete overkill from a tax savings standpoint for me to write off the entire cost of the instrument this year (unless I have to claim the loan as "income" as mentioned above). I'm not too keen on depreciation, as I may one day sell this instrument.

EDIT: I live and work in the US.

Replies (17)

Edited: October 15, 2021, 5:39 AM · First, be sure to talk to an actual accountant. However...

As far as I know, the loan is not income. Similarly, payments on the loan may also not be expenses, except perhaps to the degree that interest is involved.

There were some newspaper articles about 30 years ago about a NYPhil violinist who wrote off the purchase of a bow over time. Tools of the trade, depreciation, etc. That might give some ideas.

But your best bet may be to work with an accountant who has done this before-- for tradesmen or small businesses if not necessarily musicians.

October 14, 2021, 3:25 PM · I would consult a tax accountant with experience.
October 14, 2021, 5:26 PM · Re both: I've always been a DIY tax guy, but as this is a much larger purchase than I ordinarily make, perhaps it's time to seek out a pro.
Edited: October 15, 2021, 6:46 AM · After retiring from my long-term employment (34 years) with the U.S. Government I decided to build my Social Security and other retirement packages by becoming an independent consultant and hopefully earning extra money. I got advice from an accountant and followed it.

I purchased a computer, software and laser printer system - expensive back then in 1989 ($5,000). I depreciated the purchase over the minimum allowed time. Three years later I leased a vehicle for 5 years and deducted the amount of the monthly payments in proportion to my business fraction of use. (I purchased it from the leasing company (American Express (business card0 - by far best deal I could find for a lease and no down payment) for the initially agreed amount at the end of the lease.) I still own and drive it! I kept the business going for about 15 years - the vehicle has been mine for 28 years.

It is most important that you realize that your annual deduction for business expenses does not exceed the income from that "business." If that is likely to happen, consult with an accountant - for sure! If you are financing your purchase you might be able to depreciate the purchase and declare the interest separately - here again consult with an accountant.

October 14, 2021, 6:51 PM · If you pay taxes in the US: What is clear is that a loan is not income for tax purposes. And interest payments are not deductible, except for mortgages on a house that you actually live in. A loan for a violin is treated by the IRS just like a car loan.

However, if you are a professional the purchase of a violin (regardless of the source of the money) is a professional expense and ought to be deductible IMHO. If it really is you will have to find out from an accountant.

October 15, 2021, 9:50 AM · A professional accountant/tax preparer will treat this as a business expense (tools of the trade) just like computer, car, etc. Being a violin doesn't make the case special at all.
October 15, 2021, 10:22 AM · Don't consult an accountant. Just do whatever some amateur violinists on the internet suggest. What you save on accountancy fees can be spent on a new set of strings or a cake of REALLY great rosin.

Just wanted to give an alternative viewpoint...

October 15, 2021, 10:48 AM · Has your morning coffee kicked in yet?
October 15, 2021, 11:24 AM · Actually it can be very helpful to consult others musicians and violinists - I know I had a lot of conflicting information on whether or not a violin could be considered a depreciating asset, if it actually is expected to appreciate in value, etc. Yes, talk to an accountant, but see how other violinists have handled it. Not every accountant - or violinist - will give the same advice.
October 15, 2021, 1:39 PM · IIRC, the depreciation will be charged against income, BUT as the book value drops, the eventual capital gain upon a sale will go up. How that plays through if you trade it for an even more valuable instrument, etc., is something an accountant will be able to walk you through. Tax law isn't always logical.

Obviously, if you plan to hold it until your death, then that becomes less of a problem.

October 15, 2021, 2:03 PM · there is a niche specialty for financing and depreciating musical instruments. If there's a lot of money involved, seek this out. This is one reason the most expensive instruments have become so much more expensive in the last several years!
October 15, 2021, 2:34 PM · I read an article about a young violinist (Zoe Martin-Doike) who is now studying accounting due to COVID.

She seems to excel at everything she does so it might be worth contacting her.

October 16, 2021, 9:51 AM · I agree with Laurie, but so far I haven't seen a reply from anyone whose situation is the same as the OP -- taking out a loan for an instrument for professional work.

What seems to "make sense" is that the purchase of the violin would be deductible as a business expense. The question is whether the loan is income and the loan payments business expenses. That's a better question for an accountant because it probably depends on all kinds of other stuff.

October 16, 2021, 10:56 AM · Even Reverse Mortgage income is not taxed as income. It is treated as a loan.
October 16, 2021, 11:55 AM · I can tell you from personal experience that this question is complicated, and you can get different advice from different accountants.
October 16, 2021, 12:37 PM · Normally loan payments are not deductible. Lease payments, yes, but that is a little complicated for a non-Cremonese instrument.

There are some things you can write off at the time of purchase. Other, (generally larger) purchases have to be depreciated over time. For navigating that, you need to know what the state of the law is.

Edited: October 16, 2021, 6:00 PM · The loan is not income, no different from buying the violin with a credit card. If it is truly professional the interest on the loan would be deductible as an expense along with the cost of the violin (not the payments). Currently, in equipment purchases you can elect to write off the entire purchase price up to a pretty high limit the first year, or spread out over the purchase life, which can be 3-30 years depending on what category it falls into. Seems like the only complications are if they questioned violin playing was a business (income wise) or the appreciation of the violin, most things depreciate after purchase. And if you sold it later there would be tax issues, money owed on that depreciation.
Having said all that, as has been said, ask an accountant.

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