Taxes for influencers can be tricky to navigate. Be sure you are incorporating the following expenses: Home office, advertising, travel, business education, tax advice, phone bill, office supplies, and many more. Sign up for Bonsai Taxes to discover hidden deductions. Our average user saves up to $5,600 on their taxes!
Taxes probably take a huge bite out of your income as a social media influencer. As a result, you'll often find yourself wondering how much of your income you can reduce through legal measures when tax season comes around.
The IRS considers a social media influencer or content creator to be a sole proprietor.
This means the IRS allows you to claim tax deductions on some of the expenses you incur in your line of business. In this article we'll look at some of the most popular influencer tax write-offs you can take advantage of when you file your 1099 taxes.
Note: If you would like software to track all your tax-deductible expenses, try Bonsai Tax. Our software can scan your bank/credit card receipts to discover potential tax write-offs, maximize your deductions, and lower your taxable income. In fact, users typically save $5,600 from their tax bills. Try a 7-day free trial today.
How do tax deductions work?
Tax deductions reduce the amount of income that is subject to taxes, which in turn reduces your income tax bill.
Note that the amount of your deduction depends on the percentage of your business use of the asset. In other words, if you use a particular asset for business purposes only 50% of the time, you can only write off 50% of the cost associated with that asset when you pay taxes. If you are a tax preparer, read on and add these to your arsenal of writeoffs. Also, check out our comprehensive checklist to ensure a smooth tax season for your clients
What Qualify As Tax Deductible Expenses For influencers?
Here are some of the most common tax write-offs for influencers:
Home Office Deduction
If you work from home, you're allowed to claim a home office deduction. This allows you to write off a percentage of your rent, mortgage interest, property taxes, qualified mortgage insurance premiums, and home insurance as business expenses.
There are a few things to keep in mind when claiming this deduction:
Your home office needs to be your primary place of business, and you should only claim the area that you use exclusively for work.
You'll need to add up all the costs related to your home office, such as rent, mortgage interest, insurance, repairs, etc. Then calculate the percentage of these expenses that relate to your home office.
To claim a home office as a tax-deductible expense, you can either claim this using the simplified deduction method or an itemized deduction (by tracking actual expenses)
By claiming the actual expenses method, you'll be able to deduct things like homeowner insurance, other home office necessities, dedicated desk, water bill, and lamps. Use our free worksheet to track home office expenses.
If you pay rent, you could even claim the costs from your taxes.
Advertising and Marketing
Any costs associated with marketing and advertising your business can be deducted, including sponsored posts, Facebook ads, and Google Adwords.
Not only are flights - domestic or international - deductible, but so are any travel expenses related to business. This includes transportation costs (cars, taxis), lodging (hotels), meals and entertainment expenses. You can only claim these tax write-offs if they are incurred away from your "tax home".
You also get business travel deductions for mileage on road trips that were filled with Influencer work-related meetings. If you drive at all for work purposes it is important to keep track of the miles driven. The standard deduction in 2021 is 56 cents per mile in 20 meaning if you drive 1,000 miles for work during the year you can write off $560 from your taxes.
If you are taking courses to improve your skills as an Influencer - such as social media marketing or photography courses -- you can deduct any associated eduction costs when tax season comes around. The money you spend on books, course materials, and even transportation to and from the school can be written off.
There are several advantages to being an independent contractor, and an expert tax advisor can assist you in optimizing your 1099 independent contractor income tax deductions strategy. Tax code and tax rules are always changing. So it would be good money spent to hire a certified public accountant to help you stay compliant with tax laws.
Hiring a tax advisor may seem like a needless expense, but the services they provide might help you save money in the long run. Preparers can assist you with your itemized deductions, estimate your real costs, and ensure that you take advantage of all available tax breaks.
And the best part? You can write off their fees when you file your 1099 taxes.
Phone bill and internet
As an influencer, you spend a huge chunk of your time being online. The IRS allows you to write off a portion of your phone and internet bills as operating fees. Unless you have a phone for just business, the expense of your cell phone bill will be partially deductible. Only the portion of the costs you paid for business or content creation.
Business insurance covers you against unforeseen costs associated with workplace injuries or errors. A professional liability policy, for example, can reimburse you if a customer accuses you of falling behind schedule or making a mistake that creates a fee.
Any insurance premiums that you pay for your business (such as liability insurance) can be deducted from your taxes.
This one is pretty self-explanatory - any office supplies that you purchase for your business can be deducted. They may include:
Printer ink cartridges
For example, if you're a blogger and you need to buy new computer equipment like a laptop, external hard drive, or memory cards, these can be deducted as well.
Meals and Entertainment
If you're out of town for a work-related meeting or conference, the costs of meals and entertainment are deductible. This includes everything from restaurant bills to movie tickets. Just be sure to keep your receipts.
The key here is that the meal has to be with a potential client, supplier, or other business contacts in order to qualify. Keep in mind that you can only deduct 50% of the meal cost.
Donating money or goods to a registered charity can result in a tax deduction. You must have written documentation from the charity with the name, date, and amount of the donation in order to claim it.
As an influencer, you need a business website to promote your services and reach a wider audience. If you spend money, building your website, the creation cost is tax-deductible. This means you can write off these expenses:
Domain name cost
The costs of any images you use
Note: Bonsai Tax can help you manage all your tax deductions in one place. We'll record all your content creations costs for you at the push of a button. The majority of our users save, on average, $5,600 from their tax bill. Try a 7-day free trial here.
You are allowed to deduct legal fees that are related to the management of your influencer business as well as deduct the costs for starting your business- this includes business formation, contract review, intellectual property advice, etc.
Clothing and Beauty Products
To look your best in the content you produce, you'll need clothing that makes you stand out. That said, any costs associated with purchasing clothing and products are deductible. This includes:
To attract more followers, you may have to offer prizes and giveaways. These costs are tax-deductible as well.
If you use any apps to help run your business, the fees for these apps are deductible. This includes social media management tools, tax accounting software, and more.
It's usually a good idea to have distinct bank accounts and credit cards for your business. If your bank or credit card provider charges yearly or monthly service fees, transfer costs, or overdraft expenses, you can deduct them.
You can also write off the amount you paid in merchant or transaction fees to a third-party payment processor, such as PayPal or Stripe. Note that you can not write off the fees associated with your personal accounts.
Self-Employed Health Care Premiums
If you’re self-employed, you can deduct health insurance premiums by 100% that you pay monthly for yourself, your spouse, and your dependents whether or not you itemize deductions.
Student Loan Interest
If you took out student loans to pay for your college education, you can deduct up to $2,500 in interest each year.
When you purchase any business-related equipment, it must be used for at least one year before you can write off the cost or depreciate the value. This will result in lower tax liability over time, as the equipment is worn out and used up (and as such, has less value).
Contributing money to an IRA is a great way to save for retirement while also reducing your taxable income. You can deduct the full amount of your contribution, no matter what tax bracket you're in.
As a 1099 contractor, self-employment taxes can often take you by surprise. This is because you're not only paying for the employee's side of Social Security and Medicare taxes but also the employer's -- that's a whopping rate of 15.3% of net business income.
The IRS acknowledges that this isn't fair, so independent contractors are allowed to write off half of your self-employment tax. While it won't change the amount of self-employment tax you owe, it will lower your income taxes. (Self-employment tax and income tax are not the same.)
Taking photos and creating content can get expensive. Keeping track of these expenses can help you lower how much you need to pay Uncle Sam at the end of the year. Now that you know about some of the top tax write-offs for influencers, here are a few tax hacks to help make sure you reap the most tax benefits of them when filing taxes:
Keep track of your operating expenses
The best way to make sure you don't miss any deductions is to keep track of all your business expenses. This can be done in a physical or digital expense journal, or even in an app like Bonsai.
Get receipts for everything
Whenever you make a purchase related to your business, make sure to get receipts and save them. This includes everything from stock photos to meals and entertainment. Then you can upload all of your saved receipts into a filing system that will organize everything for you.
Consider using tax software
If you have no idea how to go about claiming tax write-offs or are overwhelmed by the amount of information you need to keep track of in order to get every deduction that you're eligible for, then using tax software might be your best bet.
Tax software such as Bonsai Tax, for instance, can be a great way to help you accurately redeem your deductions and is an especially helpful tool if you file electronically. Users typically save $5,600 from their tax bill with our software. Try a 7-day free trial today and see how much you can save.
The IRS requires that all self-employed workers keep detailed records of their business travel costs in order to be able to claim this deduction. While this includes airfare, train tickets, and car rentals, it also includes mileage.
While it's quite easy to track mileage by carrying a notebook and pen or using an excel sheet to track miles, there are also many apps that can help take some of the hassles out of this deduction.
As a self-employed influencer, it's up to you to claim every deduction and tax credit that you're eligible for in order to reduce your taxable income. Remember, tax laws are always changing and it is important you stay up to date about tax information.
While this may require some time and effort on your part, taking the necessary steps is well worth it in the end when you get more money in your pocket at the end of the year.
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