Here is a breakdown of how I think the new tax code will affect us as voice talent. I stress as voice talent ONLY. I can’t speak to how it will affect your non-voiceover income much less your mortgage, kid’s college, etc. Also, please keep the political commentary to less than minimal. In other words, don’t! This isn’t the place for that.
FYI I culled this information from the H&R Block website, David H. Lawrence’s Facebook Live session from last week, my CPA, and some articles from sources I trust.
Keep in mind that most, if not all of this is subject to change. Everyone (including the law-makers) are still trying to figure out exactly what the new tax code is and the practical application of it.
Oh, and for the record I’m not an accountant, financial planner, attorney, fiduciary etc. so this isn’t official financial or legal advice, just one dude sharing some stuff he found & heard with other dudes. Any decisions you make regarding your finances are entirely up to you and should be made with the help of professional financial advisers who know much more about this stuff than I do.
Ready? Yes? On we go!
Here’s how your income will apply to the new rates. Compared to the old tax brackets, this should be good news for pretty much everyone…
10% (income up to $9,525 for individuals; up to $19,050 for married couples filing jointly)
12% (over $9,525 to $38,700; over $19,050 to $77,400 for couples)
22% (over $38,700 to $82,500; over $77,400 to $165,000 for couples)
24% (over $82,500 to $157,500; over $165,000 to $315,000 for couples)
32% (over $157,500 to $200,000; over $315,000 to $400,000 for couples)
35% (over $200,000 to $500,000; over $400,000 to $600,000 for couples)
37% (over $500,000; over $600,000 for couples)
As to how you will file your taxes in 2019, I assume most of you will file as Schedule A or Schedule C. For vocabulary’s sake, if you’re Schedule A you have itemized deductions. If you’re Schedule C you have business expenses.
Let talk about Schedule C first. The tax bill made very few changes to Schedule C, keeping in place most of the deductions you can take. The biggest change favors businesses that invest in equipment, allowing full expensing for five years and increasing the Section 179 small-business expensing cap to $1 million from $500,000. I doubt most of you will be spending that much on a new microphone, but I wouldn’t put it past some of you. ?
My CPA says this 20% business deduction thing does not seem to affect Schedule C voice talent. He will let me know when he gets more concrete information. FYI if you’re Schedule C you can’t write off union dues or file for unemployment.
Now let’s talk about Schedule A. Miscellaneous itemized deductions subject to the 2-percent floor have been fully eliminated. That sucks, especially for union voice talent who get W2’s. If you want to do the 20% business deduction thing, itemized deductions must be a minimum of $6,300 on Schedule A to get the benefit of itemizing over the 20% standard deduction. Even though W2 actors can’t deduct their usual business expenses anymore, you can file for unemployment so you’ve got that going for you.
Some bad news:
You can’t write off tax preparation fees anymore.
You can’t write off your agent and manager fees anymore. A good workaround is to issue them a 1099.
If you join SAG-AFTRA, you can’t write off your membership fee.
You can’t write off tuition and fees as a voice talent anymore, but you may be able to bundle that under miscellaneous fees. Don’t quote me on that. Ask your CPA.
Here is what stays the same:
Health savings account (HSA) deductions. I think the maximum contribution is $3,450 per year.
IRA deductions. The maximum contribution is still $5,500 per year.
Deductions for self-employed taxpayers (SE tax, SE health insurance, SE qualified retirement plan contributions)
For those you who are considering incorporating or changing your corporate status in reaction to the new tax code, nobody but your accountant can answer that question since everybody’s situation is different. Here’s a mini-breakdown to clarify some stuff:
Loan-out corporations: If you make $150,000 or more, it may be a good idea to incorporate. If you make less than $150,00 it may not be worth it. If you do incorporate, keep in mind that there is no withholding but you can’t file for unemployment.
Types of loan-out corporations that pertain to voice talent:
S Corp: S Corps tend to get audited more often so be careful.
LLC Single Member: goes through Schedule C.