Tax Write Offs for Youtubers, Influencers & Content Creators

today i'm going to go over my top tax write-offs for youtubers influencers and other content creators now these types of self-employment opportunities are very unique in the fact that the person is usually the business and because of that there is a lot of flexibility in terms of the tax write-offs that you qualify for for example some youtubers do clothing hauls on their channel so they can deduct the expense for their clothes on their tax return so that's like getting close depending on your income level at a 40 to 50 percent off discount but with that flexibility come some great areas as well you never want to risk getting in any trouble with the irs so in this video i want to talk about taxes for any current or future content creators out there i'll go over how income is reported i'll explain to you what taxes you need to pay and then i'll go over my top five tax deductions that you need to pay attention to so if all that sounds good to you then make sure you like this video while the intro plays [Music] hey there and welcome to our channel i'm sean with life accounting the accounting company that helps you save on taxes and build more wealth make sure you like this video and turn notifications on so you never miss out on one of our videos now before i dive in i know there are some creators out there that have businesses on top of their influence but for the purpose of this video we're just talking about the tax outcomes for creators who simply post and make money all right let's go ahead and get into it with number one how is income reported now i won't spend a ton of time on this but you need to know that as a youtuber influencer or social media content creator you are more than likely self-employed and in the eyes of the irs you are considered to be an independent contractor or business owner and usually this means that before or by january 31st you will start receiving some 1099 forms from companies that paid you at least six hundred dollars that means you'll likely get a 1099 form from youtube instagram tick tock or facebook you may also get a 1099 form from your sponsorship or your affiliate revenue as well and if you have a course and you're accepting ach or credit card payments then you'll likely get a 1099 form from your payment processor as well so by january 31st you need to be on the lookout for 1099 forms because it's going to report your total earnings okay it's going to report your total ad revenue any commissions any sponsorship revenue bonus revenue and all other sorts of income which brings me to number two what taxes do you need to pay as a creator now the big tax that shocks most newly self-employed people whether you're a youtuber freelancer or single member llc are fica taxes better known as self-employment taxes because here's the truth when you're an employee your employer covers about half of your fica taxes which for social security is a 6.2 percent tax rate and for medicare a 1.45 tax rate but when you're self-employed you have to cover all those taxes so that brings your fica or your self-employment tax rate up to 15.3 percent so many people are shocked when they see that their tax bill has grown even if their revenues or their income haven't grown very much but you can avoid this tax by changing your entity and doing some really great tax planning which by the way if you're making over seventy thousand dollars in income and you're looking to reduce your tax burden then consider working with our team because we can help make your tax life easier while saving you thousands in taxes so go ahead and click the link in the description below to apply and learn a little bit more now in addition to the self-employment tax you of course still need to pay your federal and state income taxes in which your tax rate is determined by your income level and the actual state that you live in now once you have your income and you know what taxes you need to pay it's time to legally reduce your tax burden which brings me to number three what can you write off as a creator okay now here's the thing according to the tax code anything you write off the expense must be ordinary and necessary for carrying on the business now the tax law does not specifically define what ordinary and necessary means therefore it is up to you to determine what expenses qualify as ordinary and necessary for your business now the irs does attempt to define this in a publication and according to the publication an ordinary expense is one that is common and accepted in your business or trade and a necessary expense is one that is helpful or appropriate for your trade or business for example an ordinary and necessary expense for a youtuber who reviews different foods might be dining at different restaurants so that person could write off his meals at restaurants or a vlogger who documents and earns income by traveling to different scenic mountains to create videos may be able to write off business travel expenses to some place like mount everest which is awesome but on the other hand i want you to look at it like this someone who reviews foods shouldn't expect that it is ordinary or necessary to write off travel expenses to mount everest to try sifu okay those types of things can land you in big trouble with the irs so the key thing here is to be objective and if you're still not sure ask your accountant before you incur the expense okay let's go ahead and move on to number four top five tax write-offs for creators now the purpose of business tax deductions are to give business owners an extra benefit for growing the u.s economy so in general if the purpose of the expense is for you to produce more income then it likely can be deducted that's why you can deduct business meals as long as you are eating and discussing business in order to produce more income or why you can deduct travel if it is necessary for your business to conduct a business meeting or create content for yourself or a sponsor or why you conduct a portion of your vehicle as long as you are using that vehicle for traveling on business or some type of advertising expense so of course there are a lot of deductions that you can choose from and you don't need to go deduction crazy because the majority of people still want to make sure they're making a nice profit at the end of the day all right so my first tax deduction that you should take advantage of is depreciation listen if you are buying equipment like your cameras your lighting setup advanced sound equipment computers or anything else related to your studio then you can take depreciation on those assets but typically normal depreciation takes place over a five year period but you can use section 179 which will accelerate depreciation and allow you to expense 100 percent in year one so for example if you bought equipment worth ten thousand dollars and you can write off ten thousand dollars in year one instead of only writing off two thousand dollars per year now the reason why i love depreciation and is number one on my list is because those tax deductions can help you report a loss even if you made profit as long as you do it the right way all right tax write-off number two is the home office deduction so this deduction allows you to take the square footage of your home and then write it off on your tax return so it's another one of those deductions that are really good to take advantage of because look you're already paying your mortgage or your rent so if you allocate some space even something like a garage then you can take advantage of the home office deduction now there are two ways to qualify for the home office deduction the first is the home office needs to be exclusive to your house your apartment your condo your mobile home your boat wherever you live and you must use it on a regular basis okay the second way to qualify is if your home office is your principal place of business meaning it is a place where you regularly conduct business meetings such as meeting with your clients etc so there are some exceptions to this rule though if you are a daycare or a storage facility so make sure you look at that if you are one of those entities now if you want to learn more about how the home office deduction is calculated then i'll put a link up above where you can learn everything you need to know about how to calculate the home office deduction okay moving on to tax write-off number three on my list are cell phone expenses now typically you have two types of people when it comes to cell phone expenses you have the person who wants to write off 100 of the cell phone expense such as the device the service and even the case right and then on the other side you have people who don't want to write off any cell phone expenses because well they feel like they'd never use their cell phone for business at all hey sean look i never use my phone for business ah never mind okay not really right because here's the thing if you're using your cell phone for any business purposes even if you're just doing research or answering emails or responding to comments because you're an influencer then technically you can use your cell phone for those business purposes so to take the cell phone expense you need to look at the portion of time you are spending on your phone and then look at the total cost of the phone to get your deduction okay for example let's say you're using your phone fifty percent of the day for business and your yearly cell phone expenses are three thousand dollars and you should be able to reasonably take a fifteen hundred dollar deduction for your cell phone expenses alright moving along to number four write off the three s's all right the first s is for subscriptions so as a content creator you likely need access to some programs or subscriptions to create quality content that may mean you have a subscription with the adobe suite or maybe you have a subscription with canva or some other premium stock footage website or maybe you just have a subscription with a premium news source website like new york times so you can inform people what's going on and look while 12 a month may seem like a very small write-off they can all be expense and qualify for a tax deduction that you definitely will appreciate during the tax time all right the second s is for staff look you may need help with creating some content for example you may need to hire your own freelancer or your own independent contractor to help you edit videos write blogs or make thumbnails okay all these can be a huge tax write-off but here's the thing just like you will be receiving 1099s for your earned income you will also need to issue 1099s to the people you pay as freelancers or independent contractors so that the irs has a record of it as well okay and the last s stands for services and really what this is are professional services so if you find yourself in a position where okay you need an attorney you need an accountant you need a consultant now you can write off all these as professional service fees and again depending on your tax bracket that can mean you're literally saving 40 to 50 off on these fees that may allow you to grow your business even faster okay moving on to tax write-off number five are gifts and donations okay raise your hand if you don't like free stuff okay uh everybody pretty much everyone right and it's no secret that creators can draw in a huge audience if they're willing to give away some free gifts not only is it a great tax deduction but it can help you grow your audience faster while giving you a huge pr boost with your fans in fact you will often see many celebrities and public figures make donations at the end of the year truthfully for tax purposes okay sure giving back during thanksgiving and christmas is special and nice but the tax deduction definitely helps them do it as well you'll even see some people make huge purchases or investments at the end of the year so they can leverage that accelerated depreciation that we talked about and minimize their tax burden aka buying strong assets at a discount thanks to the tax code now since you made it this far i have one bonus tip for you and that bonus tip is to separate and document everything remember as a personal content creator you are technically the business so your personal life and your business life are always intertwined now it's important for every business to separate their personal expenses from their business expenses but for a creator it is extremely important so of course i recommend that people get an ein number a separate bank account and separate business cards for all their business transactions and on top of that you need solid bookkeeping which means that you are categorizing everything correctly as income expenses liabilities assets etc and reporting the correct profit on your tax returns so you can use a software like quickbooks if you want to maintain everything on your own or of course you can hire accounting company like ours to handle it for you okay at the end of the day i don't care what you do as long as you keep things tight and organized okay so good luck we have two more videos coming up next that you may enjoy as well so make sure you check those out if you haven't already and we'll see you over there

Channel: LYFE Accounting

Views: 31,102

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Id: t7puDAYce74

Length: 14min 32sec (872 seconds)

Published: Thu Dec 30 2021