The best tax deductions you never hear about for influencers, bloggers and YouTubers
You’ve got a problem. Your blog, YouTube channel or all-around influencer business is doing well and you’re looking at a hefty tax bill come next April.
That’s not your problem though. Your problem is it’s not doing so well that you can afford the kind of accountants the rich use to cut their tax bill to zero.
Doing a Google search for creative tax deductions doesn’t work. All you find are the same lame basic results that everyone knows. Track your expenses, deduct the home office and travel, yada, yada, yada.
Don’t get me wrong, deducting every penny in business expenses counts and can lower your tax bill…but only so far. I’ll list out these basic tax deductions for the self-employed in the article but, what happens when you’re deducting all the basics and still facing tens of thousands in taxes?
That’s when you get lucky and find this article because I was in the same place, stuck between a rock and the tax man…until I did some hardcore searching the tax code.
With these six creative tax deductions for influencers, I was able to deduct hundreds of thousands from my income and save over $23,000 last year. And now I’m sharing them with you!
Disclaimer! This post is just me thinking out loud about the ways I’ve found to cut my tax bill. It is NOT tax advice. You need to understand the specific rules around each of these before you try any of them.
Saving on Income Taxes by Hiring Your Family
Your kids can earn up to $12,200 without having to pay income tax. That’s the standard deduction so earning up to that much will still be deducted down to zero tax liability for each child.
That means your business can pay your kids for every picture you post on social media, every video they appear in and, when they’re old enough, for other assistance. I pay my kids $50 each for every social media image they appear in or other content as a modeling fee. It comes off my income as an expense and into their 529 college account so it’s tax free when they withdraw it as well.
Can I Write Off Personal Expenses as an Influencer?
This has always been a question of mine. My business as an influencer and YouTuber is so much a part of my personal life, what are the personal expenses I can write off as deductions on my income?
It turns out, it’s a bit of a grey area. The IRS has said that, ‘expenses that are inherently personal are nondeductible personal expenses’ unless the costs are 100% work-related.
But what about the money a TV network pays to hire a stylist and makeup for their on-air personalities? You better believe that’s written off on the company’s taxes.
The key is to make it work-related. Plan your cut and style just before a video shoot or your social media graphics shoot. I’ve personally seen audits of influencers where the IRS has allowed these kinds of ‘directly-related’ grooming expenses for people in video- and image-related jobs, especially if you don’t get too crazy with the cost you’re deducting.
My Favorite Tax Deduction for any Small Business
This one takes quite a bit more work to set up but it alone can save you thousands in taxes and is actually a common tax planning strategy of major corporations.
You can set up a foreign corporation, most do it in a low-tax jurisdiction like the Bahamas or Ireland is also popular. For influencers, this corporation might provide services like social media management, graphics development and editing and hire foreign workers at local rates.
You hire this foreign corporation to do your social media management and pay a fair rate on the work.
How this works is the foreign company is recording a hefty profit on what it pays that filipino assistant while charging your U.S. (taxable) company rates you would expect to pay for local help. You control the foreign company so it’s not like the profit isn’t yours. You just keep it in your overseas subsidiary, growing tax-free, until you repatriate it back to the U.S. parent company. And for that, you can wait for a tax holiday where they lower the rate on repatriated profits.
It isn’t as complicated as it sounds and is why every giant U.S. company like Apple and Facebook have subsidiaries based in Ireland or some other low-tax jurisdiction. Have a tax accountant help you set this one up though.
Click to reserve your spot at the FREE YouTube Quick-start Webinar! I’m sharing three strategies that helped me grow my YouTube channel and double my business income and I guarantee they WILL work for you. Seats are limited for the webinar so make sure you reserve yours.
Everyone’s Favorite Tax Deduction
I can’t do a tax deductions article without mentioning real estate. It might not be as creative or as much a secret as the others on the list but it’s the single-best tax deduction for any type of business or entrepreneur.
When you buy rental real estate or make any improvements to it, you can deduct that value over decades as depreciation. Even though most property tends to increase in value over time, the IRS allows you to write off the capital cost to offset income.
For example, say you buy a $1,000,000 warehouse you plan on renting out for $70,000 a year. Besides all the expenses that come from owning the building like property taxes and maintenance, you can write off an additional $25,641 from the income each year for 39 years. If the annual expenses and that depreciation deduction add up to more than the rental income in any give year, the excess comes off your regular income if you’re managing the property yourself.
Even if the depreciation and expenses don’t totally offset your rental income, it’s still a great way to invest and get some of the returns tax-free and any online tax software makes it easy!
How Influencers can Save on Taxes and Healthcare
Few influencers I’ve talked to realize they can also deduct premiums for health insurance. If you’re not eligible to participate in a spouse’s healthcare plan from their job, you can deduct all health, dental and qualified LTC premiums.
You can also deduct premiums for anyone in your immediate family under 27 years of age. Use the Self-Employed Health Insurance Deduction Worksheet, IRS 535, for this one.
Best Tax-Free Retirement Accounts for Influencers
Most influencers and self-employed have an IRA or SEP IRA but you get a much higher deduction if you set up a 401K for your business. You have to be registered as a corporation for this one or an LLC with the S-Corp election but it’s a great way to shield tens of thousands from taxes.
Compared to the annual contribution cap of $5,500 (2020), you and your business can contribute up to $56,000 into your 401K depending on how much you earn. That money is tax-free until you withdraw it and a great way to save.
The Most Common Tax Deductions for Influencers and YouTubers
Those are the six most frequently missed tax deductions for influencers and other self-employed workers but let’s not forget the basics. Keeping all your business receipts and knowing what is deductible can still save you tens of thousands come tax time.
Here are the most common tax deductions for YouTubers,
- All video equipment and office equipment
- Travel expenses to conferences and shooting locations
- All office expenses and supplies
- Meals, if you use it as a business meeting or talk business
- Education and professional certification expenses
- Startup costs for planning your business
- Home office expenses including phone, internet and even your car, proportionate to the amount these are used in your business
- Legal and other services related to your business
- Any advertising or marketing expenses
Want to start making money blogging? Don’t know how to start? I want to set up your blog and get you started! Find out more here!
Everyone should pay their fair share of taxes but that doesn’t mean you should overpay. There are rules and tax deductions allowed to help people starting and running a business and you should use as many as possible. Don’t feel guilty for using the system that’s there to help you. These tax deductions for influencers and YouTubers can help you make and keep as much as possible.
Published at Tue, 24 Nov 2020 14:30:00 +0000