Self Employment Tax Deductions for Bloggers
If you've managed to turn your blog into a source of income, congratulations! Now you have to deal with self employment taxes, which can seem daunting at first. If you're anything like me, you have avoided this topic for as long as possible.
Speaking from experience, it's better to tackle the issue head on and learn to deal with self employment taxes as soon as possible, rather than avoid them. Eventually, the taxes you need to pay will catch up to you.
If you start thinking about them now, you can plan out your self-employment tax deductions. You can also start paying quarterly estimated taxes so there are no surprises at the end of the year.
The IRS considers your self-employment income taxable if you make over $400 a year from your business. The good news is that you can claim deductions for your business expenses that can help lower the amount of taxes you have to pay.
Self-Employment Tax Deductions for Bloggers
In many ways, the tax deductions of bloggers are very similar to any other freelance business. The main question you need to ask yourself when you're looking to claim something as a deduction is whether or not the item in question is used solely or primarily for your business.
It helps to start by writing down a list of all of the costs of your business, and then separate them into categories. Here are some tax deductions that are most common to bloggers:
Probably the most important deductions for bloggers are expenses related to upkeep of a website. This includes things such as hosting, domain name registration, plugins and applications, and email services.
The IRS does not easily designate a category for these expenses. However, if the expense is recurring, it's recommended that you categorize the expense as a utility. One-time digital purchases can typically be filed under “other business expenses” or “misc”.
If you hire someone to help you with your business, you can claim the expense as contract labor.
This may include hiring someone to migrate or upkeep your website, write articles for you, manage your social media, or keep track of your taxes.
If you pay someone more than $600 a year, you may be required to issue that person a 1099 form at tax time. Here's how to find out if you need to issue a 1099.
Computers and Equipment
If you buy a computer, printer, or any other equipment that is used primarily for your business, you can claim the cost of these items as a deduction. Some items can also be claimed as depreciable assets. However, claiming assets can be tricky.
I recommend that you speak with a tax professional or use self-employment tax preparation software if you plan to claim depreciation on your business assets.
If you use a part of your home as your office space, and you use this space primarily for your business, you can claim it as a deduction.
This allows you to deduct a portion of household expenses such as utilities, rent or mortgage payment, mortgage interest, home depreciation, property taxes, homeowners or renters insurance and home maintenance.
There are two ways to claim a home office deduction: Simplified and itemized. If your home office space is 300 sq ft. or less, you can claim the simplified home office deduction. If your home office is larger, you can claim an itemized home office deduction.
Read more about how to claim a home office deduction on the IRS website.
Travel & Events
If you travel to blog conferences or personal development seminars, or do any other kind of travel for your blogging business, you can claim your travel expenses and event expenses as a deduction.
This includes mileage, airfare, hotel booking, travel meals, event registration, etc. Just make sure that the expenses are indeed for your business and not for leisure travel, and makes sure you save all your transaction receipts.
Other Tax Deductions
This is in no way a complete list of all of the deductions you may be eligible to claim for your business. It's just a starting point to help bloggers see the most common deductions they may be able to claim.
Other common tax deductions include:
- Health insurance premiums – if you pay for your own health insurance and are not eligible for health insurance through your spouse's employment.
- Retirement plans
- Publications and subscriptions
- Interest on a business loan
- Internet and phone – deduct the portion (percentage) of your internet and phone bill that is used for business.
If you are unsure if something is tax deductible or not, it may be in your best interest to talk to a tax professional who regularly works with self-employed individuals.
How to Track Your Deductions
If you want to stay on top of your taxes, including how much you should pay quarterly in estimated taxes, I recommend that you invest in some kind of self-employment tax preparation software.
I personally use Quickbooks Self-Employed. It allows me to track my income and expenses directly from my bank account and paypal, track my estimated quarterly tax, categorize expenses with the click of a button, and export all of my tax data to TurboTax self-employed at the end of the year.
However, there are plenty of other great pieces of software that do the same. You can also purchase downloadable software.
The other option you have is to hire a tax professional or accountant, which can be the pricier option. This usually includes the price of them paying your quarterly tax for you, as well as preparing your taxes for you at the end of the year.
A note about business loss: If your business expenses exceed your business income, the IRS considers this a loss. If your business claims a loss for more than two years, the IRS considers it a hobby and no longer a business, and will no longer allow you to claim deductions or loss for that business. Keep this is in mind when claiming deductions and planning the growth of your business.