<p>First, spend a little money talk to a tax professional. Free advice is worth that, and nothing more. That said, here's a little info.</p>
<p>Record keeping is important. Keep your receipts, keep a notebook in your cart to record mileage for any work related car trips. This can include trips to the art supply store, the gallery or shop, etc.</p>
<p>On deductions for home studio space, the rules are <em>very</em> tight. It must be a room that is solely dedicated to your art -- the corner of your bedroom or living room will not cut it. It must be a separate room, with a door that closes. But paints, canvas, paper, notebooks, art related books, subscriptions, memberships, etc. are deductible.</p>
<p>Art sold over the internet pays federal income tax via your schedule C on all sales. You pay local state income tax only on sales made and delivered within your state. So if you live in California and send a piece to someone in New Jersey, there is no California state tax on that, or New Jersey tax. </p>
<p>There is some sort of requirement of making a profit to be able to deduct your expenses over a certain number of years -- I don't recall what it is -- maybe three years out of five? If that's the case, then maybe you make a profit in year one, but not in year two. You declare a loss for year two, make a profit in year three -- but if you need to declare a loss in year four, it's no longer considered a business, it's a hobby, and you can't take the loss.</p>
<p>Again, talk to a professional. Your school or a local arts organization may have resources available to you at little or no cost.</p>