For many of us food bloggers, blogging is a way of LIVING THE DREAM (AKA making money by doing something we really enjoy). While making money is wonderful, from a tax perspective, the lower your net income (that is, income earned less eligible expenses) the less tax you have to pay come April 15th. My first Taxes for Food Bloggers post discussed the important issue of determining whether your blogging activities are business or hobby related. Once you make that key determination, the next step is to identify any expenses you’re able to deduct to offset your blogging income.
Good news, friends.
There are LOTS of eligible expenses you can claim on your tax return, but before you can deduct an expense, you must determine whether the expense was incurred solely for blog purposes, solely for personal purposes, or a mixture of both. Generally speaking, expenses related to personal usage (i.e., not blog related) are not tax deductible. (Insert collective “dangit” here.) Mixed-used expenses must be allocated between the portion related to personal use and blogging use.
For example: HOME INTERNET EXPENSE. Let’s say you spend $50 a month for internet. If your blog is the sole purpose for having internet access at your home, the whole amount ($50 * 12 months = $600) is deductible. Granted, most of us access the internet for more than just blogging, and thus, home internet is a mixed-use expense. Bloggers must determine the proportion of their total internet usage time that relates to blogging usage versus personal usage. So, if a blogger determines his or her home internet usage to be 60% blog related, then 60% of the expense is deductible (60% * $600 = $360), while the remaining 40% ($240) is a nondeductible personal expense. Make sense?
Hey blogger, nice assets.
In addition to monthly expenses like home internet and cell phone costs, bloggers can also deduct the cost of their assets (laptop, camera, lenses, etc.). Generally, businesses deduct a portion of an asset’s cost over its useful life. This is called “depreciation expense.” A computer, for example, typically has a 5 year life for tax purposes. So, a business will claim a portion of the computer’s cost as depreciation expense each year over its 5 year life. From a blogging perspective, if the asset (laptop, camera, etc.) is used for both blogging and personal use, we again have to determine the proportion of the use that’s related to blogging purposes.
Say I have a laptop that cost me $1,500 and a camera that cost me $1,000. If I use the laptop 50% of the time for blogging, only 50% (or $750) will be eligible for depreciation expense. If I use the camera solely for blogging purposes, all $1,000 is eligible for depreciation expense. Tax software programs automatically calculate the amount of tax depreciation expense each year based on the asset’s life, but for those who are interested, here’s a link to depreciation rates by year: MACRS Rates Table A-1. (One other note: if the asset(s) are used more than 50% for business, taxpayers have the option of deducting the entire business cost basis right away (instead of deducting a portion every year over the asset’s life) via the §179 expense deduction election.)
Is it ordinary, necessary, and reasonable?
If your blog is considered a business, you can deduct any expenses that are ordinary, necessary, and reasonable for your business. If your blog is considered a hobby, you can also deduct ordinary, necessary, and reasonable expenses, BUT these expenses are limited to the amount of hobby income generated, AND these allowable expenses are further reduced by 2% of your Adjusted Gross Income. (Check out my first Taxes for Food Bloggers post for more info.)
Here are a few key expense categories to consider:
- Website hosting
- Themes and Plugins
- Domain name registration
- Logos and graphics
Assets (see discussion of depreciation above)
- Computer & Software
- Cell phone
- Office furniture
- External hard drives
- Online or print advertising
- Business cards
- Paid site submissions
- Camera & lenses
- Photo props
- Photography workshops
- 50% of blogging-related meals and entertainment
- Ingredients used for blog recipes (less any reimbursements received)
- Office supplies
- Tax return preparation costs
- Blogging community membership costs
- Training seminars or workshops
- Mileage to blog events
- Prizes purchased for giveaways
- Blogging related books and magazine subscriptions
Blogging Conference Expenses
- Conference registration fees
- Flights. If blogging is the primary purpose of the trip, then your total flight cost is deductible (even if you tack a couple days of personal travel onto the trip).
- Remember: for the mixed-used expenses, only the portion related to blogging activities are deductible. Any expenses relating to personal pleasure are not tax deductible. This includes:
- Transportation (cabs, Uber, trains, etc.)
- Sightseeing activities
Home Office Deduction
- If your blog is a business and you have a room dedicated SOLELY to blogging, you can claim a home office deduction. Note that your home office cannot be a multi-purpose room (i.e., it can’t double as your craft room or workout room or spare bedroom, etc.).
- The simplified method for calculating the home office deduction is to take the square footage of the home office (up to a maximum of 300 square feet) and multiplying by $5.
- The long-method can result in a bigger deduction, but as the name suggests, it’s a more complicated calculation. More info here.
Remember, if your blog is considered a “business” for tax purposes, all expenses incurred will be reported on Schedule C of your Form 1040. For blogs that are classified as “hobbies” for tax purposes, expenses are only deductible on Schedule A as itemized deductions, and are limited to your hobby income generated. Schedule A will compute the portion of hobby expenses that exceed 2% of your AGI, and this amount will be deductible on the tax return.
Of course, I cannot over-stress the importance of documentation. Generally speaking, the IRS has three years from the time you file your return to audit your numbers. If the IRS comes a knockin in 2019, will you be able to provide support for each number on your 2015 tax return?
Disclaimer: The information contained within this blog post is provided for informational purposes only and is not intended to substitute professional tax advice.