@GregoryDKlotz wrote:
Even though I receive a W-2, I am considered Self-employed. does that matter? Years ago, when I was a music minister - employed by a congregation to do only music - I also was considered self-employed though receiving W-2. So, could you explain a little more why I would not be able to deduct, if I am actually doing music and ministry as part of my clergy employment at this congregation? I'd appreciate it just for clarity.
In most cases, pastors are common law employees and receive a W-2, they are only considered self-employed for limited income tax purposes. As a common law employee, you are not allowed to deduct work-related expenses for tax years 2018-2025, due to the 2017 tax reform law. Pastors do not have a Schedule C for their main employment even though they have schedule SE for self-employment tax instead of social security and Medicare withholding.
If you report additional income on schedule C (this might be weddings or funerals outside the church, or side gigs as a musician) then you can include instruments and other ordinary and necessary expenses (travel, music, other supplies) as business expenses. However, you would have to allocate the expenses on a prorated basis. For example, if 10% of your income is from side gigs and reported on schedule C, but all your income involves use of the musical instruments, then you can only deduct 10% of the price of the instrument. Or, if you bought one set of instruments solely for side gigs and another set solely for your main job, you could fully expense the instruments for side gigs against side gig income, but you can't expense main job expenses against your main job income.
(Separately, we would have to think about whether the instruments are assets or expenses, and whether you can expense or depreciate them. And if you did want to list them as 5% or 10% for business, is that more trouble than its worth, for various reasons.)
Also, of course, the church can buy instruments with church funds, as long as they become property of the church. If they become your personal property, the value must be included in your W-2 taxable wages.
