If you’re a content creator, you need to report all your income to the IRS, no matter how much you earn. This applies when you’re a full-time creator, or if it’s a hobby. And if your income exceeds $600, you’ll also need to pay income taxes.
But to lighten the load of paying taxes, the IRS allows for a number of tax deductions for content creators, as long as the expenses are eligible. These write-offs, or deductions, are then subtracted from your total income to lower your tax liability. Not only can they save you money, but write-offs help with expense recapture, strategic planning, and improved cash flow management.
In this blog, we’ll help you get a handle on exactly what you can and cannot write off, as well as how to ensure that your deductions are above board and compliant.
Eligible Business Expenses
Remember that not everything you spend on creating content can be written off. However, there are several eligible tax deductions for content creators. This can either be deducted in the year you make the purchase, or depreciated over time – we’ll dive into how to do that later.
For now, let’s take a deep dive into exactly what you can deduct.
Equipment and supplies
Most of the tools of your trade are deductible. The equipment you use – from computers to lighting, or your smartphone – can be written off. And so can cameras and editing tools, as well as other software subscriptions.
This extends to the materials you use to create content. For instance, food bloggers could deduct the ingredients necessary to create content. Similarly, if you write about gaming or esports, you could deduct the costs of gaming subscriptions. Then, if you have any affiliate links, the cost to buy any of the materials you sell can be written off. This could include an outfit for fashion bloggers, as long as the expense leads to affiliate link income.
Some admin costs can also be written off, if you document them carefully. This includes bank fees associated with the accounts you use for content creation. Expenses like business insurance, licenses and permits, loan interest, and even payment processing fees are also deductible.
Travel expenses
In order to claim travel deductions, you need to meet certain requirements. These include:
- Traveling to collaborate with other content creators.
- Being gifted a stay at a hotel in exchange for a post.
- Traveling to a conference relevant to your field.
- Traveling to meet a client or potential partner.
In these instances, you can write off plane or train tickets, fuel costs and mileage. Vehicle insurance, a portion of licensing and registration fees, and even parking or toll fees can also be deducted. Any expenses towards accommodation while traveling can also be deducted.
But what about things like meals? As long as they’re associated with qualified types of travel, you can write these off.
However, as with all tax deductions for content creators, these need to be realistic and justifiable. You must also keep documentation of any money given out in the process of creating content.
Marketing and promotion
As with some other small businesses, advertising expenses can be claimed as tax deductions for content creators. Any advertising you make use of – no matter the format or the platform – can be written off, as long as it’s for the exclusive benefit of your content creation.
This extends to website hosting, listing fees, and even the costs of promotional swag and branding.
Also, if you need to attend events or conferences as part of your work, the associated costs are deductible.
Note that to write off these expenses, you must be able to prove to the IRS that they are ordinary and necessary business expenses.
Professional services and education
What if you need to enlist any professional help? Expenses like paying lawyers, image editors, marketing agencies, or consultants can be leveraged as tax deductions for content creators.
It’s also possible to write off expenses associated with subcontracting. Say you need to bring in a few freelancers. It may seem counter-intuitive, but paying someone to help you with content creation can lower your tax liability, because these payments can be written off!
So if you need to hire photographers, video editors, or writers, make sure to keep track of all associated contracts, and the payment made to them.
Similarly, if you need any training or education to help your career, this can also be written off. Whether it’s an ebook, a course, or a one-on-one session with a business coach or mentor,
Now that we’ve established what you can write off, let’s look at how these deductions work in reality. If you have a qualifying deductible expense, you’ll need to decide whether you want to deduct it in the year of purchase, or depreciate it over time.
Deduction Versus Depreciation
When it comes to tax deductions for content creators, the IRS offers two main ways of claiming write-offs.
A section 179 expense allows you to deduct the entire cost of a qualifying business expense in the same tax year that you make the purchase. Note that the IRS has limits to how much can be claimed in this way – for the 2023 tax year, it’s capped at $1,160,000.
Depreciation, on the other hand, lets you spread out the cost of an expense over what’s referred to as its ‘useful life’. In other words, rather than writing off the entire expense in one go, you deduct a portion each year for a period determined by the IRS, which varies according to the expense.
Choosing which method to use depends on a number of factors. For example, how much the expense is setting you back. If the cost is less than the Section 179 limit consider expensing it this way for a more immediate benefit. But if the expense in question is over the limit, depreciating it over a longer period could offer a higher tax benefit, even if it is portioned out.
However, as with any aspect of tax planning, it’s best to consult with professionals to see which method will be more rewarding for you.
This is especially true for your state taxes. After all, some states do not follow federal rules for expense deductions.
IRS Compliance
When it comes to tax deductions for content writers, you must follow the relevant procedures. Your claims must comply with IRS regulations.
First, make sure that the expense you want to deduct qualifies for this treatment. The IRS has several factors to consider, including:
- A clear and direct business purpose, which is only used for your content creation.
- Being ordinary and necessary within the content creation industry, and therefore not a unique or one-of-a-kind expense you’re trying to squeeze in.
- Having incurred the year of your tax return. You can’t claim expenses from years you’ve already filed taxes.
- It must be reasonable and proportional to the scale of your business. For instance, you can’t claim expenses for a private jet and banquet for a single person traveling to an event in the same state.
Then, you’re going to need to fill in the right paperwork, and do this correctly. If you’re a self-employed content creator, you’ll need Form 1099-NEC from each client or company that pays you $600 or more. You’ll also need to complete Schedule C on your income tax return. If you’re doing it full-time, your employer needs to fill out a W-2 for you.
You’ll also need to stick to the tax filing deadlines and ensure your returns are in on time.
Next, follow best practices to ensure that there aren’t any red flags around your deductions, which could lead to fines or even audits. This includes separating all business and personal expenses as accurately and meticulously as possible. You must also keep any records relating to claims securely and safely. Finally, make sure you’re up to date with any tax laws – that way, you can avoid the misfortune of something changing without your knowledge, which could affect how much money you could save.
Tax planning
Because there are so many tax deductions for content creators, these should be factored into your annual tax planning, to maximize your savings. This includes timing your purchases strategically, and collaborating with professionals to make sure you’re making the most of any available benefits, or combining these deductions with other ways to save money.
To see how we can help you make the most of possible tax deductions or a proactive tax strategy, schedule a Discovery Call with one of our CPAs.
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