Taxes. This is probably everyone’s LEAST favorite topic but everyone has to deal with it. I happen to do it for a living (insert a laughing / crying face) so I know a few things about it. Now, I don’t do personal taxes (I am a corporate tax manager), but I do know my way around the IRS code plus can interpret tax law pretty well. Here’s a breakdown of what it takes to be able to claim expenses for your blog on your tax return – because let’s be honest – ain’t nobody got time to read through the tax code unless of course you’re me lol.
Hobby or Side Gig?
First and foremost: Is your blog a hobby or a side job? This determines how you can claim your expenses and income on your tax return. The IRS outlines nine factors to determine this – so let me break it down for you:
– Are you carrying on your blogging in a business-like manner (i.e., are you keeping track of your expenses, saving your receipts, tracking your income?)
– Are you working with affiliate programs or companies in order to make money and a profit?
– Are you making thoughtful changes in order to improve your profitability? For example, if you sell an e-course and you can’t generate any income from it, do you keep making the same types of e-courses even though there is no return on your investment? Or are you making an effort to improve these services in order to turn it around?
There are some more that I could include, but you get the gist of it. If you aren’t doing the above, you should claim your blog as a hobby.
Your Blog as a Hobby
If you consider your blog as a hobby – good news! You can still deduct your expenses – but only up to your profit – so you can’t take a loss. For example, you made $100 this year for something you sold, but you spent $200 on your blog to host your website and buy a template, etc. You can only claim your expenses up to $100; your extra $100 of expenses cannot be deducted on your tax return.
You must itemize your hobby deductions on your tax return. This is on Schedule A of Form 1040. Not everyone itemizes deductions though – sometimes it makes more sense to take the standard deduction! If that is the case – you won’t even be listing your hobby expenses!
Your Blog as a Side Gig
Blogging as a business or side gig is a fairly new type of classification for the IRS. Obviously, blogging hasn’t been around for THAT long. Different rules apply to blogging as a business vs. blogging as a hobby and I will summarize them for you!
You can deduct “reasonable and necessary” blog expenses on your tax return. Pretty broad, huh? It’s easiest if you keep a spreadsheet throughout the year to track your blogging expenses. I will highlight common deductions below.
Since you are claiming it as a business, you also can take a loss. But be careful with this – you can’t continue to claim a loss year after year.
The other things you have to consider are paying estimated taxes throughout the year (if you are making over $1,000 or more in profit) and paying self-employment taxes. You can learn more about the both of these on a tax return preparer website like H&R Block or Turbotax.
Your Blog as a Side Gig – Common Expenses:
– Consulting fees
– Money paid towards buying a prize for a giveaway
– Website hosting fees
– Camera equipment
– Lighting equipment for photos
– Travel expenses for a conference
– Conference fees
– Consulting fees
– Marketing expenses
– Advertising expenses
– Home office space (if you have a dedicated home office in your home)
If you are a fashion blogger or beauty blogger, don’t try to write off the costs of clothing that you buy or your makeup. Clothing only qualifies if it’s necessary and essential to your job – like if you are a firefighter, policeman or healthcare worker.
Your Blog as a Side Gig – Common Income Sources:
– Affiliate marketing fees
– Income received from offering an e-course
– Sponsored posts income
– Value of products received in exchange for a blog post
– Social media consulting income
– Fair market value of free products (yep, that free jacket or top is income)
Basically, you subtract your expenses from your income to determine if you have a loss or profit for the year, and pay tax or get a refund accordingly.
I hope this helps you with prepping your tax return this year! And I have to put this disclaimer here so you don’t hunt me down if you get audited. Don’t worry – I give my parents the same disclaimer when I file their taxes.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction