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. Make sure you read to the end for a freebie that will assist you with your taxes!
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
As part of the 2018 tax reform, they did away with deducting hobby expenses. Best to make it a legitimate side business so you can take advantage of deducting your losses!
Your Blog as a Business
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. In order to claim expenses for your business, you will need to file a Schedule C.
Here is what a schedule C looks like. Through the paid version of Turbotax, you can file a schedule C very easily:
Part 1: Income
This one is fairly straighforward. You want to report ALL of your income for the year related to your blog. Since you will not receive a W-2 for your blog, you need to figure out your sources of income.
Here are some common examples of income related to your blog:
- Affiliate marketing fees (are you part of an affiliate network? Did you generate income from posting a banner, sharing a sale, or through reward style? This counts as income)
- 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
- Gift cards
This is not an all-inclusive list, but rather some ideas to get you thinking about what can be counted as income. Please note, if a brand sent you a “thank you gift” but there was NO posting requirements, or anything related to that, it was strictly a gift – you don’t have to claim it as income, unless the gift has a really high dollar value.
Part 2 – Expenses
Expenses are not as straightforward. I am going to walk you through the very common lines that you will use as a blogger in claiming your expenses. Keeping receipts is highly advisable.
Line 8 – Advertising
- Money paid towards buying a prize for a giveaway, ad space, and facebook/instagram promotions
Line 9 – Car and Truck Expenses (related to business use of your vehicle)
- This one can get super complicated. I would consult this article here https://www.hrblock.com/tax-center/filing/adjustments-and-deductions/deducting-your-self-employed-vehicle-expenses for any questions (they can explain far better than I can!
Line 10 – Commission and fees:
- Any commissions you may have paid someone – for example, sales commissions if you sell something, or commission paid to employees or agents
Line 11 – Contract Labor
- This is where you should file a 1099-MISC for any contract labor you hired for more than $600 during the year. For example, you paid someone $1,000 to revamp your website, that would be considered contract labor. Please note that the IRS can fine you for NOT providing a 1099.
Line 13 – Depreciation
- Depreciation is taken on property placed in service in 2018. This one can be get complicated as well, but certain computer software, computer hardware, camera equipment – is all supposed to be depreciated. Here is an article on depreciation. https://quickbooks.intuit.com/global/resources/accounting-taxes/small-business-accounting-how-to-record-depreciation-in-your-books/
Line 17 –Legal and Professional Services
- Did you consult a lawyer or any accounting professional for advice, and pay them an hourly fee? If so, you can deduct that here.
Line 18 – Office expenses
- Did you purchase a new desk, pens, paper, calendars, planners, etc? Don’t try to deduct artwork but necessary office expenses to run your business can be deducted right here. Postage is also included!
Line 23 – Taxes and licenses
- Did you file paperwork in your state to register yourself as an LLC? Did you pay for a business license? All of these items can be deducted here. Also included are property taxes on business assets (for example, if you have an office space for which you pay property tax on)
Line 24a – Travel
- If you had to travel to the RewardStyle conference, for example, you can deduct your lodging and transportation costs to fly to the conference, and your hotel stay. Please note, however, if you were paid to attend a conference and ALL lodging was paid for by the conference, then you may not deduct it.
Line 24b – Deductible Meals
- Now, say you had to buy dinner and lunch while away, attending a conference, then you are allowed to deduct up to 50% of the cost. You cannot exceed the 50% rule. Please keep in mind the meal cannot have been lavish and extravagant (as in, you bought a bottle of Dom Perignon)
Line 25 – Utilities
- If you use your personal cell phone for blogging calls / internet, then keep track of your business vs. personal use and deduct the amount of the phone bills here.
Line 27a – Other expenses
- You can include here any other item that you can’t categorize above. Some ideas would be software license fees, paypal fees, subscriptions. Etc. If you pay for a website host, you can plug it in here as well.
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.
How to file:
I would strongly suggesting using Turbotax or another online software to file your taxes. I have done my own taxes for 10 years (and do it for a living) and I even use Turbotax. It calculates everything itself. You will need to use the paid version if you want to file a Schedule C. Please don’t forget to file your state return as well!
Individuals who file a Schedule C are always the most common group of people to get audited. That being said, I highly suggest keeping a copy of your receipts. Mileage is one of the most audited expenses, so make sure that if you are deducting mileage, that you keep a log for yourself. Please remember that if you do get audited and owe money to the IRS, there will be penalties and fees associated with this as well. If something doesn’t seem deductible to you, don’t do it. Having been in taxes for 10 years, I always always take the conservative approach rather than the aggressive one. 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.
Update for 2020:
I’ve added a link for the spreadsheet that I use throughout the year to track your expenses and income!! Here’s the link https://docs.google.com/spreadsheets/d/1J5DFpHznke9S4HqU71VzJ05d6hotgCBXvOJhCJu3lyI/edit?usp=sharing
Hope it keeps you a little more organized this year!
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