Tax tips for independent musicians in 2026

It’s tax season. If you’re an independent artist earning from streaming, live shows, music publishing, and more, knowing what and how to prepare in advance can help you during tax time.

In this blog, you’ll learn the basics of reporting music income, the most common deductions for musicians, and best practices for keeping clean and useful income records.

Do I have to report income from my music?

We’ll start with the basics. Yes, you must report your music income to the IRS. Whether it’s a cash payment from a bar or royalties from streaming platforms paid by your distributor, it all counts as income.

How do I report income from CD Baby?

When you release music with CD Baby, you must complete a W-9 form to receive payouts (or a W-8 if you’re a non-U.S. resident).

If you are paid $10 or more in revenue during the year, CD Baby will issue a Form 1099-MISC to report this income to you and a copy goes to the IRS. However, if you are a non-U.S. resident and earned any US-source revenue at all from streams, you’ll be issued a Form 1042-S. You can find more related information here at our Help Center.

CD Baby makes it simple to track your earnings through the year in our analytics dashboard. If you’re a member, you can access your dashboard here.

How you report your income from CD Baby depends on whether you treat your music as a hobby or a business.

How do I know whether my music is a business or hobby?

According to the IRS, a hobby is an activity done for sport, recreation, or pleasure — not for profit. As a hobby, you can still generate meaningful income, but profit is not your end goal. A business, on the other hand, operates with the intention of making a profit. But it’s not this black and white.

To determine whether your music activity qualifies as a business, the IRS recommends considering several factors — none of which solely classifies your music as one or the other. So it’s important to look at the full picture and consult a tax professional if you’re unsure.

• Whether you carry on the activity in a businesslike manner and keep complete, accurate books and records
• Whether you have personal motives for engaging in the activity
• Whether the time and effort you put into it suggest an intent to make a profit
• Whether you depend on income from the activity for your livelihood
• Whether any losses are due to circumstances beyond your control or are typical during the startup phase
• Whether you or your advisors have the knowledge needed to run the activity as a successful business
• Whether you’ve made a profit in similar activities in the past
• Whether the activity makes a profit in some years (and how much)
• Whether you can reasonably expect future profit from appreciation of assets used in the activity

What if my music is a hobby?

If you determine your music is a hobby, you generally still must report your income on your tax return. Here is more information from the IRS on this.

What if my music is a business? 

If you’ve determined that your music is a business, you’ll likely need to identify the structure of your business before filing taxes to accurately report your income and expenses. Some common business structures for musicians are Sole Proprietorship, Partnership, and Limited Liability Corporation (LLC). Please consult a tax advisor on what entity structure would be best suited for you and how to accurately file your taxes under such structure.

What if I split the income earned with collaborators (or bandmates)?

Music groups often appoint one member as the unofficial manager and money person. If that’s you, chances are a payor like a music venue sent you a W-9 to fill out for payment — followed by a 1099 notifying you that income was reported to the IRS.

While it’s easy for payors to do this, it’s inconvenient for the musician filling out the W-9 because it looks like all the revenue on the 1099 form was earned by one individual.

Please consult a tax advisor on how best to split and report income with collaborators as each situation is unique.

Best practices for tracking your music income and expenses

Keep clean and accurate records throughout the year. That information will come in handy when you’re filing your taxes. Here are a few best practices:

Keep a separate bank account for music income: Consolidating your income and expenses into a single account will ensure nothing gets lost.

Maintain a simple spreadsheet or accounting tool: There are plenty of accounting tools online, but sometimes a simple spreadsheet documenting your income and expenses is more than sufficient. 

Track mileage and food on business-related trips: Tracking these expenses as well as vehicle maintenance and repairs may come in handy during tax time.

Save receipts for gear, marketing, and studio costs: This information is also crucial for tracking expenses around your music as a business.

Store copies of contracts and payment records: Having copies of how much you’ve earned and paid to collaborators is helpful for verifying end-of-year paperwork is accurate.

Common tax deductions for musicians

So far, we’ve covered how to report your music income as a hobby or business, a bit of the taxes and forms involved, and best practices for keeping records. Now let’s look at common deductions that can reduce your taxable income. This is where good record-keeping really pays off.

Musicians often have unique business expenses, many of which may be tax-deductible:

Recording costs: The Help Independent Tracks Succeed (HITS) Act passed in July of 2025 and may provide beneficial deductions for musicians. Consult with your tax advisor to see how you might benefit.

Advertising: Online ads, website subscriptions, flyers, billboards, and other promotional costs may be deductible.

Auto expenses: Vehicle repairs, maintenance and mileage may be deducted on a cents per mile basis. You can learn more here. 

Food: Meals while touring may be deductible if they meet IRS criteria. Typically, 50% of qualifying meal expenses may be deductible. Learn more about business travel expenses here.

Merch: Merchandise costs may be deductible. It’s best to consult with a tax advisor on how to calculate those costs.

Home office, practice space, or studio: You may deduct a portion of your housing expenses if you use part of your home exclusively for music work. You can learn more here.

Internet or cell phone: Similar to the square footage of your home studio, figure out what percent of your Internet use was for your music business and these costs may be deductible.

Insurance: Gear insurance and certain self-employed health insurance costs may be deductible.

Asset depreciation: Instruments may be depreciable assets where the depreciation expense may be deductible. Consult with your tax advisor on how to determine your depreciable assets and related depreciation expenses. 

Tax assistance services: If you hire a professional to prepare your business taxes, part of that cost may be deductible.

For the most up-to-date information, review the IRS resources on form Schedule C and Deducting Business Expenses.

Conclusion

As an independent musician, taxes can feel like yet another complex system to navigate. But you can set yourself up for success by keeping detailed records of income and expenses around your music. Remember, when in doubt, reach out to a certified tax professional and/or attorney. 

If you’re a CD Baby artist preparing for tax season, you can easily access detailed information about your income and update your tax information within your account dashboard. It’s one of many ways we make it easy for musicians to manage their finances around their music. Create a free CD Baby today to start tracking your earnings.

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