Top Tax Deductions Every Influencer Should Know – Part 2

The less enjoyable side of being an influencer is filing taxes. But it doesn’t have to mean paying the IRS hand over fist. Understanding the available tax deductions can help you save big when tax time rolls around.

Why Tax Deductions Matter for Influencers

All business owners must file taxes. There’s no way around that. However, influencers face unique challenges. The financial landscape is uniquely complex and closer to what someone participating in the gig economy will face rather than the way traditional businesses operate.

The good news is that mastering tax deductions will help you save money and boost your overall financial health. On the other hand, missing out on those deductions means leaving money on the table.

We’ll walk you through some of the most important and most often overlooked deductions to help you reduce your tax bill.

Tech and Equipment Deductions

Influencers rely heavily on technology. That means spending a lot of money on things like computers, smartphones, cameras, other recording gear, lighting, and so much more. These purchases can be written off on your taxes.

Don’t limit yourself to physical equipment, either. Do you pay for a subscription to software that’s vital to your business? Do you pay for access to premium social media management tools? Those are also tax deductible!

Home Office Deductions

As an influencer, chances are good that you do a lot of your work from home. That means you can claim a home office deduction on your taxes. Wait just a second before you do that, though. You’ll need to do it right to avoid raising suspicion with the IRS.

First, you must use a portion of your home as a business office regularly. Second, you must calculate the percentage of your home taken up by office space. For instance, if your office measures 300 square feet and your home is 1,500 square feet, then you would claim 20% of your home as office space.

You can also use the IRS’ simplified square footage method, which allows you to deduct a specific dollar amount per square foot of office space. In 2022, it was $5 per square foot with a maximum of 300 square feet. This amount changes annually, so make sure you have the current year’s deduction.

Influencers also depend on a reliable Internet connection and the use of smartphones. Both of those incur monthly costs, which are tax-deductible. Running a business out of your home entitles you to deduct a portion of most household bills from your taxes.

For instance, if your home office accounts for 10% of your home’s space, then you can also deduct 10% from your mortgage costs, your utilities, and even your homeowner’s insurance. Other home-related costs like pest control and cleaning services are also partially deductible.

Travel and Networking Deductions

Do you travel for photoshoots, brand partnerships, or work-related events? Those costs are tax deductible. This includes the cost of transportation, as well as your accommodations. The same is true for meals and entertainment related to business networking or collaboration.

However, don’t mix personal and business expenses. If you’re traveling for work and decide to go to a theme park for fun, you can’t deduct the tickets to the theme park or any expenses incurred within the park, like food or souvenirs.

Educational Expenses

All business owners should invest in themselves through education. The good news is that these costs are usually tax deductible. That means courses and workshops related to content creation, marketing, or developing niche skills can be written off on your taxes. This also includes subscriptions to industry-related publications or websites.

Professional Services

Influencers must work with a wide range of other professionals. This includes graphic designers, web designers, video editors, and others. You’ll also need to work with accounting and legal experts to handle brand contract negotiations. All these costs are tax deductible. Note that this also includes hiring an experienced tax professional to ensure your books are in order.

Marketing and Promotion Expenses

Building a successful business requires investing in marketing activities and promotions. You can deduct those costs from your taxes. This includes advertising costs on social media, as well as the costs you incur related to giveaways or merchandise production costs. That means you can usually deduct the costs of promoted posts and ad campaigns on platforms like Facebook or Instagram, as well as the cost of purchasing giveaway items and promoting your event.

What qualifies as a legitimate business expense for influencers?

Any expense that is ordinary and necessary for the operation of the influencer’s business can qualify, but it’s important to consult with a tax professional for specifics.

Can I deduct the full cost of my new camera or computer?

If you use your computer or camera primarily for business purposes, you can deduct the full cost of your equipment. Always keep receipts for equipment purchases and consult with a tax expert.

How do I prove that my travel was business-related?

Keeping detailed records, conference tickets, brand meeting schedules, and other documentation can help substantiate business travel claims. Any records that support your claims that you engaged in business during a period of travel will help.

Is there a risk in claiming too many deductions?

Yes, aggressively claiming deductions can raise red flags for tax authorities. It’s essential to claim only legitimate expenses and have documentation to back up every deduction.

Conclusion

Proactive tax planning is essential for influencers. Otherwise, you could miss critical deductions and owe too much to the IRS. However, you can’t afford to be too aggressive with your deductions, either. Keep detailed records to support every single deduction, and always consult with a tax professional to maximize your tax savings.

As an influencer, it’s important to review your expenses, gather documentation that supports your claims, and connect with an experienced tax professional to ensure you take full advantage of the available deductions.