It has taken a lot of hard work, but you are finally earning income from your blog. That’s the good news. The not so good news is that you need to report your income to the IRS. This post will help explain how you can save money by recording and deducting eligible blog expenses.
Many people feel overwhelmed by the bookkeeping and accounting aspects of their blog business. But let’s break it down so you know what you need to be doing to track your income and expenses.
Disclaimer: This post is for information purposes only and does not constitute tax or legal advice. This post contains affiliate links, see my Disclosures here.
How Recordkeeping Helps You Save Money
If you are a sole proprietor or single-member LLC, you will need to keep track of your blog income and expenses because these will be reported on Schedule C, which is filed at the end of the year with your personal tax return. By keeping good records of your blogging expenses, you will be able to deduct qualified expenses from your blogging income. This will save you money!
The first question we need to address is what counts as a blogging expense. To answer this, we will look to an IRS publication.
The IRS Publication 535 states, “To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.” Personal expenses are never tax deductible.
What Blogging Expenses Qualify?
When you unpack this statement, you see that qualified expenses are those that are common in your industry and are useful for helping you earn income. Let’s look at some examples that are specific to the blogging world to highlight what expenses are tax deductible.
Most bloggers are aware of the importance of growing an email list. Many of the email service provider programs are paid software. This would qualify as an ordinary and necessary expense. It’s common in the industry and helps you earn income in your business. Another example would be social media scheduling tools like Tailwind, your domain name, and website hosting. All of these expenses clearly satisfy the ordinary and necessary criteria and are definitely tax deductible.
Many business expenses that bloggers incur are similar to other businesses and as such are clearly deductible. However, when it comes to the supplies and materials that bloggers purchase for their projects and posts, the waters get a little murky.
Blogging Supplies and Materials
Most blog niches, (DIY, home decor, and food just to name a few) rely on blog posts with a project focus. Spending money on supplies is necessary in order to offer tested instructions and beautiful step by step photos to your readers.
All the supplies, materials, and ingredients for blog projects can really add up! How much can you treat as a business expense? What can you deduct on your taxes?
Let’s look at some scenarios a blogger might encounter in order to determine what expenses are personal and therefore not tax deductible, and what expenses are legitimately tax deductible.
If you are a food blogger, ingredient purchases to create a recipe for your blog would count as an expense. However, it is important to mention that not all food purchases are blogging expenses. If you make a purchase that includes grocery items for your family, those personal grocery items are NOT deductible. That’s why it’s helpful to keep business and personal purchases separate.
We’ll continue with the food blogger example to highlight another point. Let’s pretend you blog about cakes. Your child’s birthday is coming, so you decide to make a cake for the party and blog about the process. Since there are a lot of people coming, you purchase ingredients for 3 cakes. Only the ingredients for one cake are deductible because the other two are for personal use and weren’t necessary for business. I hope this is beginning to make sense.
Let’s move to a slightly different example. Pretend you are a DIY blogger and write about home decor projects. You purchase a table at a yard sale and supplies to refinish it and write a post about your process.
The supplies are deductible because they are part of the process you are blogging about, but what about the cost of the table? If you are planning to keep it, then it is partly for personal use not just business use. In cases like this, you can deduct a portion of the cost of the table as a business expense. The other portion is personal in nature and not tax deductible.
What if on your blog you rehab furniture then sell it? In this case, you would be able to deduct the full cost of the table and the supplies, but you would also record the amount received for the table as business income.
For bloggers, the deductibility of some expenses is not easy to determine. In these cases, use your best judgment and keep detailed records.
Detailed Records Help You Save Money
When purchasing blog post materials and supplies, record keeping is extremely important. Back to our earlier example, when you purchase the ingredients for your cake along with your families groceries, pay for the cake items in a separate transaction, and preferably with a business only credit or debit card. Jot down on your separate receipt what the materials or ingredients were for, and possibly even mark down the date of the blog post. The more information you can provide to substantiate the business purpose of the tax deduction, the better.
With good records, you can substantiate that your purchases are for your business. The more tax-deductible expenses you have, the less you pay in taxes!
This is not an encouragement to falsely claim expenses on your tax return! You should always be truthful, honest and accurate when you file your taxes.
However, what I think happens all too often is that bloggers are unsure about what is tax deductible, they don’t have good records to back up their expenses, and therefore they do not claim legitimate tax deductions. This costs them money!
As you move forward in your blogging business, keeping good financial records is one of the keys to success. The program I recommend for blog bookkeeping is QuickBooks Simple Start. Using this program to keep track of your income and expenses will make tax time less stressful and help you save money.