Depending on what state you're in, setting up an llc is pretty simple and cheap for something ike a band llc to run your income and expenses through. It let's you take advantage of those expense deductions (rented space, guitar strings, yada yada) against any income you're earning with your music. There's no reason for you to take a tax hit on money received to pay for a joint expense of rehearsal space. What they give you in income goes out in expenses.