Tax season is still a few months away, but it’s never too early to begin preparing the tax documents that may need to file your tax return. While this is true for all taxpayers, individuals who own their own businesses – or those who who have more complicated tax situations – must pay closer attention to ensure that all of their qualifying tax deductions and credits are applied to their income tax return. A growing number of today’s small business owners are members of the blogging community. While some bloggers share their content for personal reasons, others actually blog as a way to earn income. If you are one of those who makes or intends to make a profit, consider the following tax deductions that may reduce your tax liabilities.
Since blogs are published online, Internet expenses are typically tax-deductible. Additionally, the following related expenses may very likely qualify for tax deductions:
- Media Downloads: If you have to download music or photos for your blog, any fees that you pay for publishing rights are tax-deductible.
- Software: Any programs and software required to run your blog
- Domain Fees: Includes Internet access fees, hosting fees and registration fees for domain names
If you blog for money, you will need to have your own computer, which typically includes such accessories as keyboards, mice, and monitors. Depending on your business needs you may also use a printer, copier, fax machine and scanner. Cellphones and digital cameras may also be used for your business, all of which may be considered deductible expenses.
Home Office Supplies/Expenses
Small business owners who blog out of their own homes may have a home office set up to facilitate operations for their business. If your home office is used exclusively and regularly for business purposes, is your principal place of business, and is a separate identifiable space in your home, you may be able to deduct your home office expenses based on the square footage of the space. Using the square footage calculation, business owners can deduct a percentage of household indirect expenses, such as rent, electricity costs, heating costs, insurance and so forth. If you own your home, you can take a depreciation deduction (calculation is tricky), and pro rata share deductions for property taxes, repairs, and insurance. Additionally, direct expenses such as cost of your computer warranty, your chair, your desk, that are used in your home office for business purposes can be deducted as business expenses.
Small Business Expenses
Many people do not understand that blogging can be a legitimate business, providing income for one or more individuals. Like any other business, certain expenses resulting from the running of the business can be used as a tax deduction. These may include fees paid for licenses, insurance, accounting services, banking, tax preparation fees and any other expenses that you may have incurred as part of building and/or maintaining your blog.
Education & Networking
With blogging becoming an industry of its own, it is necessary for bloggers to stay ahead of the curve by educating themselves and by networking with other bloggers. Related education expenses – such as classes, seminars, webinars, etc. – are tax-deductible. In addition to education, any professional association fees and subscriptions to trade publications or relevant market research studies and tools may be eligible to deduct as well.
Bloggers are now meeting other bloggers at conventions and conferences worldwide. As the blogging industry continues to grow and evolve, travel may become necessary for small business owners to remain current in the industry. Business-related travel expenses, such as rental car costs, hotel accommodations, dining and even some entertainment (if business-related) expenses, may be deducted at tax time. Keep all receipts from your trip to provide documentation of business travel expenses.
In order to earn income from a blog, you must have an audience. Any money spent on advertising, graphic design costs for logo and banner ad development, contest prizes, and SEO and SEM services will be tax-deductible. Also, since social media networks have become hugely popular as a way to connect with a blog’s audience, many bloggers hire experts to manage their social media networks. The cost of hiring any of these consultants is a tax deduction as well.
Other Fun & Miscellaneous Deductions
Just about any expense – no matter how seemingly strange – can be deducted if you are able to prove that the expense is necessary to run your blogging business. Some fun deductions that may apply to certain bloggers include:
- Cable or Satellite TV Charges: If you run a blog that offers movie reviews or critiques the effectiveness of TV commercials, you may be able to deduct these expenses.
- Pet Expenses: If your blog documents your duck hunting expeditions or chronicles the daily life of your animal, your pet expenses can be deductible.
- Alcohol: If you blog about wine, beer, whiskey, tequila, grain alcohol or any other type of alcohol, you may be able to take a 100% deduction for these types of things rather than the 50% deduction that is typically allowed for entertainment expenses.
- Trips to Exotic Locations: As previously discussed, money that you spend traveling to a training seminar – including seminars in exotic locations – is tax-deductible. Also, if you run a travel blog and write about your experiences, any trip that you take may be fully or partially deductible.
Not All Bloggers Qualify for Deductions
As you may have noticed, all deductions allowed by the IRS apply to business-related expenses. Of course, not all bloggers are business owners. In order to offset other income that you may have earned, you should have a blog that produces profit at least three of the past five years; otherwise, the IRS may deem your blogging activity to be a hobby. IRS classification of your blog as a hobby means that “allowable deductions cannot exceed the gross receipts for the activity.” In other words, your blog-related deductions cannot have totaled more than the income that you report from your blog (or hobby) on your tax return. In turn, your blog’s expenses will be subject to the 2% miscellaneous expenses rule. See IRS.gov to learn more about the strict guidelines that are in place to determine whether your blog is for profit or merely a hobby.
When in doubt, it always recommended that you check with your tax preparer or accountant as opposed to making assumptions that may land you in hot water with the IRS.