Tax-Deductible Expenses Every Influencer Should Track
Claiming every tax deduction available to you is important. It’s the only way to keep more of your income as an influencer and build a strong, stable financial base. However, accuracy is important, or you could raise red flags with the IRS.
The trick is to track those expenses so you can report information when and where necessary. Not sure which expenses you should be tracking? We’ll lay it all out for you here.
Key Tax-Deductible Expenses for Influencers
Every business expense you incur affects your bottom line. Many of those expenses are unavoidable, and the IRS allows you to deduct them from your taxes. The most important expenses you should be tracking as an influencer fall into a handful of categories, including equipment and technology, meals, clothing, home office deductions, travel and transportation, professional development, marketing and promotion, business operations, and gifts/giveaways.
Equipment and Technology
Influencers can’t run their businesses without access to modern equipment, which makes investments in things like cameras, lighting, and microphones essential. In many cases, these can be written off entirely. Other items in this category include editing software, business-related apps, subscription services, and technology maintenance and repair costs.
Meals
Meals can be deductible as long as they were eaten when traveling for business, when collaborating with others, or when discussing business items. You can even deduct the costs you incur at the local coffee shop, provided you’re working from the location.
Clothing
Are you a fashion or lifestyle blogger? If so, you can deduct the cost of clothing if you earn money through affiliate links tagged to those items. Clothing that’s related to your brand but not everyday wear, such as a cosplay outfit for a YouTube gamer, can also be deducted.
Home Office Deductions
You can deduct your home office space from your taxes. The IRS has simplified rules that allow you to claim $5 per square foot up to a maximum of 300 square feet, or $1,500. Note that to qualify for this, the space must be for the exclusive and regular use of your business, which means you can’t claim mixed-use space that supports both personal and business needs. You can also deduct a percentage of other bills, including your utilities and mortgage, based on the percentage of your home occupied by office space. So, if your office takes up 10% of your home by square footage, you can deduct 10% from many of your bills.
Travel and Transportation
Influencers often need to travel for business, whether that’s to a photo or video shoot, a business trip, a collaboration with a brand partner, or something else. You can deduct the cost of flights, rental cars, taxis, and even car maintenance in these situations, but those costs must relate directly to your business.
Professional Development
Investing in yourself to build a stronger business? That’s a great idea. It’s also tax deductible. You can track the expenses related to courses, webinars, workshops, books, magazines, and other information sources.
Marketing and Promotion
Building a thriving influencer platform requires that you market and promote your brand. Track these expenses because they’re tax deductible. That includes the costs of running ads or boosting posts, as well as the costs of hiring PR agencies, working with marketing managers, and hiring other professionals.
Business Operations
Business operations is something of a catch-all term that covers things ranging from platform fees or commissions by hosting sites to the cost of hiring editors and photographers. Licensing, permits, and insurance also fall under this, and all of them can be deducted from your taxes.
Gifts and Giveaways
Influencers who give away items or give gifts to followers or other influencers can recoup these costs by deducting them from their taxes.
Tracking and Organizing Your Deductions
Now that you know the most important expenses to track, let’s discuss how to do that.
The Importance of Receipts
Documentation is critical when dealing with tax deductions. Every single purchase should have a corresponding record if you intend to claim it on your taxes. The good news is that you can use digital tools and others to digitize those records.
Digital Tracking Solutions
Manually tracking expenses is so 20th century. Today, you have access to a wide range of digital tracking solutions, including robust accounting software tailored to the unique needs of influencers. Many of these platforms offer automated expense tracking and categorization to save you time and hassle while improving accuracy.
Routine and Financial Check-Ins
In addition to using modern tools and ensuring that you have robust documentation for every purchase, it’s also important to set monthly or quarterly reviews of your expenses. This helps ensure that you have a manageable number and aren’t overwhelmed. Be consistent in tracking and reviewing your expenses to help ensure accuracy and timeliness, too.
I attended an event and covered it on my platform, but the event wasn’t exclusive to the business. Can I still deduct it?
Only a portion of the event that pertains to your influencer activities might be deductible. Always consult with a tax professional for such nuanced scenarios.
I lost a receipt for a significant purchase related to my influencer activities. What should I do?
While it’s good practice to keep receipts for major purchases, in the absence of one, other documents like bank statements or digital confirmations might be used.
Can I deduct the cost of items I buy to review on my platform but later return?
Generally, if you receive a refund for an item, you can’t claim the initial expense as a deduction. It’s essential to handle such situations transparently.
How long should I keep records and receipts related to my deductible expenses?
It’s generally recommended to keep tax records and related documentation for at least three years, depending on your jurisdiction’s tax laws.
Conclusion
Understanding and tracking tax-deductible expenses allows you to maximize your deductions while ensuring compliance with tax laws. It’s important to look at this process as a central pillar of your overall success as an influencer. It’s also critical to invest in your financial literacy, use digital tools for tracking, and regularly consult with financial professionals to optimize your tax strategy.
