This article is for my fellow blog owners who are looking for tax deductions & tax reduction strategies for bloggers. Many have asked about the possibility to deduct expenses incurred in setting up and maintaining their blogs.
Naturally, there are many expenses with owning and operating a blog, but often times especially when starting out, there is little or no income to show for one’s blogging efforts.
If your blog is generating income and you are operating it as a for profit business, then your related expenses would be deductible as a business expense.
What if my blog has little income, can I still deduct related expenses?
The answer here is trickier. If you are in fact operating your blog as a “business”, the answer is yes. However, how does one determine if a blog is a business? If is not readily apparent to the blog owner, then it’s probably not a business. A business blog should have a profit motive with mechanisms in place (or planned) to generate revenue from the blog. This can be affiliate links, ads, sponsored posts, paid reviews, coaching/mentoring services, fee-based informational courses and digital or physical products for sale.
There are other ways to help create the appearance of a profit oriented business blog. Obtaining a business name via an LLC or DBA would be advisable. Setting up a business credit card for blog expenses and a business checking account for blog income would also be a good idea. Consider joining business blog groups such as Business Bloggers United on Facebook to align with other profit minded business bloggers.
Businesses can operate at a loss and still utilize deductions, however an activity is presumed for profit if it makes a profit in at least three of the last five tax years, including the current year. Otherwise, the IRS (Internal Revenue Service) will deem that your “business” is not a for profit business, but a “hobby”. This is referred to as the hobby loss rule. If your blog is determined by the IRS to be a “hobby”, then your deductions can not exceed your blogging income.
If you have a profit oriented blog that you hope to generate income from, and you plan to deduct your business expenses you need to ensure that you keep proper documentation and that you are able to justify the deduction. What do I mean by this? If you purchased a computer that is used primarily for personal use and you hope to deduct the entire cost as a business expense, that would not be advisable. Expenses that are of a personal nature should be considered very carefully since only the “business” portion would be allowed as a tax deduction.
If you think you meet the prerequisites of a for profit business blog, you can generally deduct expenses that are ordinary and necessary in operating your blog, but only to the extent that the expenses are attributable to your blogging business. Here is a short list of what may be deductible for you:
- Internet connectivity expenses
- Web hosting fees / domain fees
- Software (plugins, themes, security, online newsletter services)
- Computer equipment
- Office equipment
- Graphic design
- Bookkeeping software
- Tax preparation fees
- Home office expenses
- Educational blogging programs
- Business travel expenses
- Marketing materials
- Mailbox rental
As usual, only the business portion of the above expenses are deductible. So for example, if your Internet connection service is used for personal use, you need to estimate the percentage that is actually used for your blogging business. All of the deductions claimed should be well documented with receipts and good records. In case your tax return is ever questioned, you would need to be able to substantiate the deductions taken.
The information presented in the above article is general in nature, and not warranted or guaranteed. Your situation is specific to you alone, so be sure to speak with a Certified Public Accountant or a trusted tax advisor to discuss your specific situation.
Did you find this post useful? If so, I would greatly appreciate if you commented below with your thoughts.
To your success!
Noel B. Lorenzana
Disclaimer: Any accounting, business or tax advice contained in this article, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties. If desired, I would be pleased to perform the requisite research and provide you with a detailed written analysis. Such an engagement may be the subject of a separate engagement letter that would define the scope and limits of the desired consultation services.
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