It’s no secret: the world has gone digital, and with the continuous and rapid growth in social media platforms, more and more people are capitalizing on paid content opportunities. There are roughly 50 million content creators across digital platforms, with approximately 2 million of them making 6-figure incomes from their social platforms. While this may be thrilling, as a social media influencer you may need to take a moment to consider how your earnings impact what you owe Uncle Sam.
Are social media earnings tax-deductible?
The short answer is, yes. As a social media influencer, you work as an independent contractor for the companies you promote. Brands partner with social influencers, who are typically not appointed as employees for that brand, but who render services in favor of the brand – this is the IRS definition of an independent contractor, and as such you are liable for self-employment taxes, which can be done by completing 1099 forms and work-related expense deductibles.
A social media influencer earning more than $600 from one client, should receive a 1099-NEC form directly from the client, which will quote the amount they paid to you. Even if your earnings were below $600, you will still have to report the income when doing your taxes, but the onus is on you to generate and fill out the form.
Even if you are employed by another company that withholds taxes on your behalf, you still must pay self-employment tax on any income you gain in your independent capacity. Things may also become additionally complex when your social influencer work takes place across different states, which is common in this industry. If you work for companies outside of your home state, you may have to file multiple state tax returns.
Tax deductions for social media influencers
Like any other self-employed people, social media influencers pay their taxes quarterly instead of once a year like most employees. The only upside about paying taxes is that if you have to pay them, you can likely deduct some of the expenses you incur while running your social influencer business.
Tax deductions for social media influencers
Depending on your niche, social media marketing can be quite lucrative and generate an attractive income. Whether that’s cash or a percentage of sales, you’ll need to keep track of each transaction and the expenses that help keep your influence alive and well.
Omitting expense deductibles on estimated tax forms each quarter is common among social media influencers, which can easily result in overpayments. It is important to consult with an accounting expert to establish software solutions to help you manage these.
These are the ordinary expenses that social media influencers typically can include as deductions when filing their taxes:
- Cellphone and laptop
- Cameras and other filming equipment
- Prizes used in social media posts
- Website-related expenses
- Editing and other related software and apps
- Stock imagery and other related subscriptions
- Business-related travel costs
- Business-related meal costs (to secure the business, for example)
- Office Supplies
- Trademark and copyright fees
- Marketing costs
It is advisable to consult with an accounting expert that understands the scope of each of the projects you may work on as a social media influencer. This may affect the scope of the expenses you might be able to claim too. It is highly advisable for social media influencers scaling their earnings fast via this medium, to consult with an expert to help them save money in taxes.
The best practice for the self-employed is to keep accurate financial records for tax-deductible expenses and taxable income. Software solutions such as QuickBooks can help manage independent contractor tax liabilities and is beneficial for recording and tracking your expenses and earnings.
At Fusion, our CPAs can set up your recordkeeping on QuickBooks and provide bookkeeping services to help you optimize tax-deductible expenses. We help to ensure you are making timely estimated self-employment and federal income taxes to avoid penalties and fees imposed by the IRS.
This blog article is not intended to be the rendering of legal, accounting, tax advice, or other professional services. Articles are based on current or proposed tax rules at the time they are written, and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.