While sharing my content about income tax deductions, I had another blogger ask me about tax deductions for food bloggers. I decided I would answer his question with a post for my fellow bloggers. I will start with blogging in general and then move to his specific niche, food blogging.
At first glance, it may not seem that you are spending a great deal on your blogging endeavors. However, the fact is that blogging does cost money. And, if you are making income from your blogging, you might want to offset some of that with the help of tax breaks for your costs. Before you go claiming tax breaks, though, it is a good idea to double check to make sure that the items you claim truly are related to your blogging efforts.
Blogging is a relatively new profession, but it’s covered by the same tax laws that apply to many other occupations. The main danger from a tax perspective is that, as a self-employed blogger, your taxes may or may not be automatically withheld from your earnings, as is typical with traditional employees. Additionally, you’ll owe self-employment taxes that most employees don’t pay. However, you may be able to take advantage of certain deductions to reduce your tax bill.
Be aware that as a blogger, you’re likely to face estimated taxes, something most traditional employees don’t have to worry about.
The United States tax system operates on a “pay-as-you-go” basis. Since you don’t have any taxes deducted from your blogging income, you must pay estimated taxes to the IRS every quarter. The due dates for estimated taxes are April 15, June 15, September 15 and January 15 (with some exceptions for holidays, etc.). If you don’t pay your estimated taxes in a timely fashion, you may owe an additional tax penalty. If you didn’t have any tax liability in the prior year, or if you don’t expect to earn at least $1,000 in blogging income, you may be able to avoid paying estimated taxes.
When saving for your estimated income taxes, don’t forget to set aside additional money for self-employment tax. From the perspective of the IRS, working as a blogger means you run your own business.
Even if you only work part-time as a blogger and full-time as a salaried employee somewhere else, the blogging part of your income qualifies as self-employment income. As a result, you must pay self-employment tax on that income. Self-employment tax is the combined Social Security and Medicare taxes paid by an employee and an employer. Since you run your own business, you must pay both the employee and the employer portions. Self-employment tax must be paid whether or not you owe any federal income tax.
Deductible expenses for bloggers
The good news about running a business as a blogger is that you are allowed to deduct expenses that are considered reasonable and necessary to your profession. If you pay for advertising, supplies, office furniture, electronics, insurance or other goods and services that directly relate to your business, you can take those expenses off the income you earn as a blogger. If your office is in your home, you may be able to deduct some of your household expenses as well, including rent and utilities.
Business as hobby
The IRS will disallow your tax deductions if your blogging business is categorized as a hobby. To claim your deductions, you must demonstrate to the IRS that you are running a bona fide business. The most obvious way to prove this is to earn a profit. If you have a profit in at least three of the most recent five tax years, you can usually qualify your business as legitimate.
Other things the IRS may consider are the time and activity you put into the business, whether or not you depend on income from it and if you can reasonably expect to make a profit in future years.
Home Office SuppliesIf you are blogging from a home office, you can deduct a lot of the supplies that you use. (Just make sure you are using them only for your blogging efforts.)
This can include equipment depreciation for computers, as well as the chair you sit in, the desk you use and things like calendars, pens, headsets, external hard drives, and telephones.
You can also deduct supplies that go with a specific type of blogging that you do.
If you have a photo blog, you can deduct the cost of the camera you use. Did you need to buy a web cam to make videos you post on your blog? If so, that can be deductible as well. If you have a dedicated cell phone used specifically in connection with your business as a blogger, some of those expenses are tax deductible.
Online ExpensesYou’re a blogger, so most of your expenses are likely to be related to your online activities. Luckily, these are tax deductible.
The cost of WordPress plug-ins, web hosting, online advertising that you do, premium WordPress themes (like Bluchic), and domain name expenses are all tax deductible. Web design, graphics and logos, maintenance and even Internet access can be deducted.
Even if you don’t have separate access for your blogging business, you can take a percentage of your total bill.
My internet bill is $39.99 a month, and about 80% of our Internet usage is accounted for by my professional blogging and financial coaching business. As a result, $31.99 of our bill is eligible for a tax break.
On top of that, if you get SEO services or pay for social media consulting to help you improve your blog’s traffic, you can also get a tax break for those costs.
You can also get a tax break for access to subscriptions sites that you use for researching your blog posts and the costs of access stock image sites.
Use of Your HomeIf you have a dedicated home office space, you can get a tax break for the business use of your home related to your blogging activities. Figure the square footage of your office space, and then use that to figure what percentage of the total square footage of your home you are using for your blogging activities.
My home office takes up about 2% of the square footage in my home. This means that I can get a tax break for 2% of the utilities I pay, my mortgage payment and my homeowner’s insurance premium. All of that adds up to close to a $400 tax break.
Not something to sneeze at.
Other Blogger Tax BreaksThere are a number of other tax breaks that bloggers might be eligible for. These include:
- Tax preparation costs for your business.
- Business incorporation costs if you decide to move beyond a sole proprietorship (e.g. LLC or S-Corp).
- Business license renewal.
- Salary and contract fees you pay to those who do work for you.
- Travel expenses related to your blogging. (I deduct costs related to BlogWorld attendance.)
- Trade show fees.
- Offline advertising costs, including business promotion like letterhead and business cards.
- Annual fees for business credit cards.
- Mailing materials.
For an expense related to your business to be deductible, it needs to be both “ordinary” and “necessary”. No matter what the industry, that is the standard that the IRS will use. So, any time that you question whether something is deductible, as a first step, ask yourself is this “ordinary” and “necessary”?
An ordinary expense is one that is common and accepted in your industry. It’s the one time that you care about what your competitors are doing. No matter what your mother says, it does matter whether everyone else is doing it, too.
A necessary expense is one that is helpful and appropriate for your trade or business. You don’t have to prove that you couldn’t be in business without the expense – more or less, it needs to make good business sense.
Again, for an expense to be deductible, it needs to be both.
Deductible expenses also need to be distinguished from the cost of goods sold; capital expenses; and personal expenses. The cost of goods sold generally includes items like inventory for resale or the cost of raw materials to make goods for sale. Capital expenses encompass money used for start-up costs or improving your business (and must be amortized rather than deducted). Personal expenses are exactly what they sound like: expenses for personal or family use; expenses used for personal and for business purposes must be divided appropriately for purposes of expenses.
So, with all of this info, take a peek at your expenses and start thinking:
1, Is it “ordinary” and “necessary”? If no, not deductible. If yes, then move on:
2, Is it related to the cost of goods sold? If yes, then it’s more properly deducted in the cost of goods sold. If no, or if you haven’t included it in the cost of goods sold, then move on:
3, Is it related to capital? If yes, then you may need to amortize. If no, then move on:
4, Is the expense for an item for your personal or family use? If not, then IT’S DEDUCTIBLE! If yes, then you have a second part of the question: Can the personal use be separated from business use? You answered yes, then you can deduct the part attributable to business use as a business expense. If no, then no part of it is deductible.
- Some examples:
It’s ordinary and necessary to buy ingredients for the purpose of making food to review. No, it’s not related to the cost of goods sold. No, it’s not related to capital. But is it for personal use? This is what you’re going to have to sort out in order to figure your deduction.
Food that you eat at home is generally not deductible as a business expense. You have to have food to live, which makes it a personal expense. But to the extent that the food that you’re making and trying is for business use, it would be deductible, so long as you can distinguish the personal and business pieces. This means that it will depend on the individual facts and circumstances involved. Here are some examples:
- Your blog is a baking blog and you make a full course meal, soup to nuts. Is it deductible? Perhaps the cost of the sourdough bread is … but not the rest of the meal.
- Your blog is a baking blog and you make three loaves of sourdough bread. Is is deductible? Probably the cost of one loaf – that’s the part you needed for your review, right? But not three. The other two are likely to be eaten for personal use and are not deductible.
- Your blog is a general food blog and you make a lasagne for your entire family. Is it deductible? Maybe. If your blog is a “family food blog”, then perhaps the family-sized portion is deductible. If your blog focuses solely on a niche, like healthy eating or cooking with noodles, then only the portion attributable to you, for the purposes of testing, is deductible.
So, separate, separate, separate.
The same general rules apply to restaurant reviews. To the extent that you order dishes solely for review, then it should be deductible (but only to you, not to your companions) but add-ons like wine and bread may not be.
A couple more caveats: It’s important to remember the hobby loss rules. If you’re blogging as a business, you may have deductions in a year that exceed your blogging-related income; you don’t want to make this a habit or IRS will believe that your blog is a hobby, not a business. If you’re blogging for a hobby, then your deductions may not exceed your blogging-related income.
Also, keep in mind that this area is very dependent on fact and circumstances. Consider your own situation carefully and not attempt to make something fit that doesn’t. Don’t be greedy: think through your potential deductions carefully and honestly. Remember: pigs get fat, hogs get slaughtered.
You’ll need to retain excellent records with annotations about the expenses. Don’t expect the IRS to allow you to write off your grocery list. Keep your personal expenses distinct from your business expenses. Shop separately for your blog, where possible, and try to buy specifically for your business purpose. Don’t buy a dozen eggs, use one and try to write off the other eleven. Keep a good database of which items you used for which recipe (and, if you’re freelancing, for which publication or blog). If you can, it’s best to write directly on the receipt what it was for and how you used it: “lemon curd for holiday meal piece, Gourmet magazine, 12-24-16.”
Blogging and internet-related activities are relatively new to the tax scene. I’m not sure how the IRS is going to treat some of these specific areas. But the law is the law and the rules about “ordinary” and “necessary”, as well as distinctions between personal and business use, haven’t changed. Don’t get caught up in the “particulars” of it all, just follow the rules. If your situation is particularly tricky, you should definitely consult with a tax pro (it’s deductible!) before making any significant tax-related decisions.
Before you take a deduction, it is a good idea to check with a tax professional, and make sure that you are truly eligible for the tax breaks you want.
If any of my blogger friends have any other deductions that I may have overlooked, please comment below and help the rest of the class.