When it comes to taxes, influencers and content creators have an opportunity to write off a wide range of costs to lower their annual tax bill. Every dollar you spend directly on your business can offset your income, which offsets your income on your business or personal tax return. Here’s a closer look at how tax influencer write-offs work for influencers and content creators to help you understand how to use write-offs to lower your taxes.
How to Organize Business Expenses
Organizing your business finances is essential to ensuring you don’t miss any potential content creator write-offs. All transactions should be funneled through dedicated financial accounts just for your business.
Separate Business and Personal Finances
The first step in organizing your business finances is completely separating them from your personal finances. If you don’t already have a dedicated business bank account, it’s time to open one. If you have an LLC, you can open an account under the business name. Otherwise, you can open one under your name, but it should be kept dedicated to business purposes. You can do the same with a business credit card.
The benefits of dedicated accounts include:
- Easier to identify business vs. personal transactions
- Faster and more accurate tax preparation
- Preserve the legal benefits of an LLC or S corporation
Maintain Detailed Records
With dedicated bank and credit card accounts for your business, you can more confidently know which expenses are eligible for influencer write-offs, assuming you don’t mix personal transactions in those accounts. You should also keep these documents, either electronically or in paper form.
- Bank statements
- Credit card statements
- Receipts for business purchases
- Invoices for business transactions
Use Expense Tracking Software
While keeping detailed records is important, statements and receipts are not the best format for quick and easy financial reporting. Accounting or expense tracking software is designed just for this purpose. While you can use a spreadsheet, bookkeeping software helps ensure you have accurate and helpful reports with just a few clicks.
Top options include QuickBooks, Xero, and FreshBooks. With these apps, you can automatically download and categorize transactions, saving you time and ensuring timely and accurate business information and tax reports.
Maximizing Tax Savings Through Depreciation
Depreciation is an accounting term for allocating the cost of a long-term asset over time. While it’s less common for influencers and content creators, it’s worth knowing if you buy hardware, a vehicle, or even a building that could last for many years.
Identify Depreciable Assets
Items that will last more than a year and cost more than $2,500 generally have to be depreciated over multiple years. For example, let’s say you buy a fancy new computer for video editing that costs $4,000. According to IRS rules, you can write off the entire $4,000 the year you buy it. Instead, you can write off a portion of the $4,000 every year for five years.
Understand Depreciation Schedules
The IRS requires you to spread out the cost following a specific schedule. You’ll typically follow either a straight-line depreciation schedule, where the same amount is written off every year, or an accelerated depreciation schedule called MACRS, which stands for Modified Accelerated Cost Recovery System (MACRS).
Most creators don’t have assets worth more than $2,500, so we won’t get into the nitty-gritty details about how these work. But as your business grows, if you buy expensive items that last multiple years, it’s important to read IRS documentation or consult a trusted tax expert to ensure you follow the rules correctly.
Most Common Tax Write-Offs and Deductions for Influencers and Content Creators
As an influencer or content creator, you may have a wide range of expenses that can lower your taxes. Here’s a look at some of the most common content creator write-offs and deductions. Keep your receipts from these purchases and be prepared to demonstrate how they relate to your business if you’re audited by the IRS.
Equipment and Technology
As an online content creator or influencer, just about anything related to computers, audio, and video is likely a tax write-off. After all, you can’t do the work without a computer, camera, or microphone in most cases.
Additional items to consider may include hard drives, USB drives, video or audio editing software, and business-related subscriptions. For example, a paid Google Workspace or Microsoft 365 account for business email is deductible. Your website domain and hosting also likely fall into this category, as do tools like Canva or Adobe Creative Suite.
Home Office Expenses
The home office deduction can be valuable, but it’s also one of the tricker deductions to handle correctly.
The main idea here is that you can deduct a percentage of your home expenses if you use a room exclusively for business purposes. For example, if you have a 1,000-square-foot home and use a 200-square-foot room for business, you can deduct 20% of your expenses as business-related.
The 20% could include your rent or mortgage interest, utilities, and other eligible expenses. Carefully read IRS guidelines or consult a trusted tax expert to ensure you don’t run afoul of the law.
Advertising and Promotion
Like any other business, you can advertise your business and deduct the costs. Online ads, sponsored posts on other creators’ accounts, conference booth materials, and business cards are all under the advertising and promotion umbrella.
Like any other expense, keeping close track of the costs is important. If you pay another influencer, be sure to get an invoice or receipt for your tax records.
Most Overlooked Tax Write-Offs for Content Creators
What counts as a business expense is broader than many influencers and creators realize. Here are some commonly overlooked tax write-offs for content creators.
Educational Expenses
If you attend a conference or workshop, take a course, or even sign up for a class at a local college, the expenses may be eligible for a write-off if they are relevant to your online business. And it doesn’t have to be creator-specific. If you’re a cooking influencer and take a cooking class, that’s related to your business, and may be deductible.
Again, keep receipts or invoices and documentation that proves it’s related to your business.
Software Subscriptions
Tracking and Reporting Income from Multiple Sources
Tax write-offs offset income, so tracking and understanding your business income is also important to maximize your deductions. An accurate income and expense record leads to an accurate tax return with every eligible expense deducted.
Comprehensive Income Tracking
At the start of this article, we discussed the importance of dedicated business bank and credit card accounts to ensure you can easily track every expense. The same goes for income.
Creators tend to receive income in multiple ways, including brand partnerships, ad revenue, affiliate marketing, speaking engagements, and much more. When every one of these payments is directed to your business bank account, you won’t accidentally miss something.
Even if you don’t get a 1099 form or reach $600 in income from a source, you’re still required by law to track and report that income to the IRS. Keeping updated bookkeeping records in an app like QuickBooks or Xero makes this much easier. It’s best to update your books at least once a month with new transactions.
How LLCs Can Benefit Influencers
An LLC can be hugely beneficial to influencers, with tax savings and legal liability as top reasons to form an entity for your business. Here are some areas where upgrading to an LLC can be helpful.
Capture Every Write-Off to Lower Your Tax Bill
With dedicated financial accounts, a reliable recordkeeping system, and knowledge of what counts as a business expense, you can capture every eligible write-off and legally lower your taxes. That’s a big win for your finances.
If you don’t have one already, an LLC may help you maximize your influence tax write-offs. Learn more or get your LLC started here.
