How to Claim Expenses for Your Jewelry Business

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If you are running a jewelry business and have any related expenses, you may be able to claim these expenses as deductions on your taxes. You may also be able to deduct business use of your home or studio. Many jewelry artists do not enter into business with the business side in mind. However, it can make a big difference in your income. Check with a tax advisor or the Internal Revenue Service to determine if your side income is a hobby or a business.

For example, if you make and sell your jewelry designs, there are many aspects of the craft that can be deducted on your taxes. Raw materials such as gemstones, metal, and wire are tax-deductible, along with packaging, signage, mailing materials, and more. Knowing which types of items are tax-deductible can empower you to make sound business decisions as you manage your business throughout the year.

Here are some steps you can take to claim expenses for your jewelry business:

Keep records: It is essential to keep accurate records of all your business expenses. This includes receipts, invoices, cash transactions, and bank statements. There are many ways to track expenses, from simply writing things down and keeping receipts, to using apps to help organize your paperwork.

Create expense categories: Sort your expenses by category, such as materials, equipment, subscriptions, insurance, mileage, education, professional services, and other business-related items. This will help you easily identify which expenses are deductible. It is equally important to know which items are not deductible.

Determine which expenses are deductible: Compare your categories and entries against the IRS guidelines or contact your tax preparer for help. Remember to keep these categories in mind as you move into the next tax year, making note of any items that stand out. Knowing which expenses are deductible may encourage you to hire contract labor such as photographers, business coaches, and other services.

Calculate your deductions: Once you have identified your deductible expenses, you can calculate the total amount of deductions you can claim. You can deduct the full amount of certain expenses, such as supplies and materials. Other expenses may be subject to depreciation over time.

Complete your tax return: When you file your tax return, report your deductions on Schedule C (Form 1040). Schedule C is used for reporting income or loss from a business. Be sure to keep all your receipts and other supporting documents in case you are audited by the IRS. You should preserve these for three years from the date you filed your original return.

Keep It “Simple”

Although business bookkeeping can be complicated, knowledge is power. One of the biggest pitfalls for artistpreneurs is combining personal and business expenses. Creatives have developed many ways to keep their paperwork separate. One of the simplest methods is taking pictures of all receipts and keep the originals on file.

It’s always a good idea to consult with a tax professional or accountant to ensure that you are accurately claiming your expenses and maximizing your deductions. The information in this article is solely an overview. Be sure to consult your tax advisor for the most up-to-date information.

All images courtesy of Getty Images.

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