Tax question: self employment rate or ordinary income tax rate ?

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  • #34414 Reply
    Musicmatters
    Participant

    Hi everyone,
    I recently came across this article about royalties and taxes for US based composers and I was hoping someone could help me. Here is the statement in question.

    “If you are currently a working musician, then royalties and placements are all taxed at the self-employment tax rate. If you are no longer working as a musician and are still receiving royalties for prior work, those are taxed at the lower, ordinary income tax rate.”
    This excerpt was taken from the following article

    If this is true it could save a lot of composers a lot of taxes. Most royalties are generated from prior works but most of us are still working so it’s very confusing. Can anyone clarify, thanks

    #34429 Reply
    Musicmatters
    Participant

    Would appreciate a response from any US based composers who are filing taxes individually. Are any of you reporting royalty income on schedule C or schedule E ? Thank you

    #34434 Reply
    Michael Nickolas
    Participant

    I’ve always done a Schedule C as I’ve been self employed my entire career. As I understand it Schedule E is for passive income and not for income that you are actively involved in as an ongoing endeavor. Plus, doing a Schedule C allows you to deduct your costs of doing business.

    #34435 Reply
    Musicmatters
    Participant

    Thanks for your reply, Michael

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