3 Types of Artist / Music Income

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As an musician, do you dream of a big record deal, acclaim, or fame and fortune? Or are you more interested in a career with music and an income level sufficient to earn a comfortable living? As a painter, do you want to be able to sell enough of your pieces to earn steady income or do you want to license your pieces to catalogues, calendars, and film makers for a fee? As a chef, do you want to open your own restaurant or chain of restaurants, sell books of your recipes, and make appearances on television food channels?

Whatever financial rewards you seek with your career as an artist or musician, there are 3 types of income you should be aware of and know what their sources are. The 3 types of income are passive, portfolio, an earned. Some of these incomes can bleed away your ability to become wealthy, while others can make you rich. What differentiates these 3 types of income is their source and tax rate.
 
Income Sources and Tax rates

Earned income is the highest taxed of all the incomes (50%) and is generally earned as an employee. This type of income can be made as a musician by working for a studio and playing with the bands and musicians that need back-up personnel to fill in their arrangements. You might be paid by the hour or earning a fixed salary, but either way you'll taxed 50% of what you earn. As a chef, you'd earn this type of income by working in a restaurant, making dishes every night, coming up with new recipes, and dealing with food suppliers. As an illustrator, you might work for a company like Disney or Pixar generating new characters and backgrounds for animated movies and T.V. shows. In each of these cases, the work may be very rewarding but the pay will probably be horrible, if only because of the deductions for taxes.

Portfolio income is the second highest taxed of the incomes (20%) and is generate from paper assets such as stocks, bonds, ETF's, and mutual funds. Usually this type of income is created by individuals through a 401K, IRA, or brokerage account through the appreciation (increased value) of their investments in paper assets. If you're an employee at Capitol Records or run a small record label, you are able to contribute a certain amount of your earnings to a 401K, IRA, or brokerage account in an effort to save and grow enough money for retirement. Different tax rules apply for different situations in regard to the amount of contribution, but in general gains in paper assets are taxed within this bracket.

As an artist it is possible to generate portfolio income from your artwork but it'll require financial savvy, creative thinking, and an extensive use of contracts to be able to discover how. For example, look up celebrity bonds, specifically Bowie Bonds, and find out how David Bowie was able to take himself public by leveraging his royalty money and create an asset for investors to profit from.

Passive income is almost always generated from investment real estate and in the form of rental money. If planned properly passive income taxes can get as low as 0%. A competent tax attorney or tax accountant should be able to educate you about lowering your passive income taxes to 0% legally through the purchase, sale, or acquisition of additional real estate properties. Using part of your earned and portfolio income to buy real estate is a wonderful tactic for an artist to use in eventually becoming financially free.

Another source of portfolio income an artist can produce is from licensing their work for uses other than what was originally intended. For musicians, this might mean having your music used in T.V. shows, movies, and remixes. You could also investigate the publishing side of songwriting and write songs for singers and bands who need new or more material, while you take a small cut from every CD they sell or performance they give. Some songs can live forever by living many lives in the recordings and performances of other musicians, but as long as the songwriter was able to retain creative control over the music, then he can profit from every CD, concert, radio play, and re-release that ever gets made.

Now imagine how much income you could pull in if you had several or dozens of songs working for you, like an employee, essentially freeing you from having to work ever again. This way you can focus on composing new songs and performing.

To get a thorough and in-depth education about taxes, artist income, and contracts, get in touch with a competent music or intellectual property attorney, tax accountant, and music publisher.

To learn more about the 3 types of income, click here.


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Related Music:

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Related Articles:

The Cash Flow Quadrant - What Is It? And What Should It Mean to Musicians and other Artists
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Marc

http://stereothesis.com/


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