So, you’re juggling a W-2 job while building your business as an entertainer or creative entrepreneur. First off, respect—it’s no small feat balancing the steady paycheck with your passion. But here’s the thing: did you know your business expenses and losses could help reduce how much you owe Uncle Sam on that W-2 income?

What’s the Play?

Offsetting W-2 income basically means using the money you spend on your business to lower your taxable income. For example: You made $60,000 from your 9-to-5 this year, but you poured $15,000 into your creative business—gear, travel, marketing, the works. That $15,000 in expenses could potentially knock down your taxable income, which means you pay less in taxes. Simple enough, right? But like anything involving taxes, there’s more to it.

What Can You Write Off?

Here’s the rule: If it’s a legit expense for your business, it might be deductible. Think about it like this:

• Equipment: Cameras, mics, laptops, editing software—basically, the tools of your trade.
• Workspace: If you’re running things from home, a portion of your rent or utilities might count.
• Travel: Gas, flights, hotels, meals—if it’s for business, it’s in the mix.
• Marketing: Social media ads, website hosting, promo materials.
• Professional Help: Paying that designer, consultant, or photographer? Deductible.

These are just a few examples, but the key is making sure these expenses are actually tied to your business. It's important to keep it clean; no funny business.

How Do Business Losses Work?

Here’s where things get good: If your business runs at a loss—meaning you spent more than you earned—you can use that loss to offset your W-2 income. This can save you big on taxes. Let’s say your W-2 job brought in $90,000, but your business expenses totaled $20,000. You can use that $20,000 to lower your taxable income, bringing it down to $70,000.

IRS Limits: How Much Can You Offset?

Now, there are limits to how much of your losses you can apply:

1. The 80% Rule: You can only use your net operating loss (NOL) to offset up to 80% of your taxable income.Example: If your taxable income is $90,000, the max loss you can apply is $72,000 (80% of $90,000).
2. The Cap: If your losses are massive, the IRS caps how much you can offset. For 2024, that’s $270,000 for single filers or $540,000 for married folks filing jointly.

If your losses are higher than these limits, no worries—you can carry those losses into future years.

The IRS Wants Proof

Here’s the deal: The IRS needs to see that your business is legit and not just a hobby. That means:

• You’re working on your business consistently.
• You have a real plan to make a profit.
• You’re keeping records (aka receipts, invoices, and logs).

Bottom line: Treat your business like a business.

How to Keep It Simple

This doesn’t have to get complicated. Here’s how you can stay on top of things:

1. Track Everything: Use a tool or app to log all your expenses, income, and receipts.
2. Separate Your Money: Open a business bank account to keep personal and business funds separate.
3. Work with a Pro: Taxes are tricky, and you’ve got better things to do. A tax professional can make sure you’re maximizing your deductions without crossing any lines.

Let’s Make It Make Sense

Here’s the play: You’ve got 3.75 quarters left in the year. That’s plenty of time to:

• Get a clear picture of where your business stands financially.
• File a complete tax return that includes all your deductions (no missed money here).
• Build a simple budget to guide the rest of the year.

This is about making sure your business works for you, not the other way around. If you need accounting and tax help for yourself or your business, we’ve got you covered. Thanks to our strategic alliance with Carson Creative Solutions, led by accounting and tax pro Asia Hill, we’ve built the Tax Ready by Design™ program to help creatives stay compliant and financially sound.

Need guidance? Reach out, and let’s talk.