Please note: the 2017 Tax Cuts & Jobs Act changed the treatment of hobby expenses.
Eater, writer, bean counter. So say my business cards, yet I’ve never touched the topics of accounting or taxes on this here blog. I mean, taxes… Blegh. Am I right? But after attending the International Food Bloggers Conference in Seattle last week, I got to thinking. Did these foodies know food blogger conference expenses are tax deductible?
You dedicate all of your free time to your blog. It’s like, a second job or something. Right? That’s how most serious food bloggers feel about their blogs, but the IRS may see it differently, and that could majorly impact the Federal tax due on your blog earnings. Whomp. Whomp.
For purposes of this analysis, lets assume you have not set up a separate legal entity (LLC, S Corporation, etc.), and that you are running this “business” as a sole proprietorship. This is the bucket most food bloggers fall into.
The big question at hand: do you blog primarily for profit or pleasure?
Here’s how the IRS tests this question:
TAX TIP: A general rule of thumb is that if your “business” makes a profit in three of the last five years, it’s considered to be an activity you’ve entered into for profit.
If an activity is a bonafide business, you can deduct all the expenses from the business, even if that means reporting a loss on your tax return (i.e., your expenses exceed your income). If the activity is classified as a “hobby” you’re not able to deduct any expenses related to that hobby. (This rule changed in 2018 due to the Tax Cuts and Jobs Act). Ouch.
On the flipside, if an activity is a bonafide business, net income from the sole proprietorship is subject to self employment tax (2014 rate was 15.3%, 1/2 of which you can claim as a deduction for AGI). Income from hobbies is not subject to the self-employment tax.
Gwen is a single taxpayer. In 2014, she made $50,000 of income from her full-time job, and appropriate taxes were withheld.
Example #1: In 2014, Gwen’s food blog generated $5,000 of revenue and incurred $3,000 of expense, for net 2014 blog INCOME of $2,000.
Business or Hobby? | Itemized or Standard Deduction? | Additional Tax Due on Blog Income |
Business | N/A | $746 Tax Due |
Hobby | Standard or Itemized | $1,261 Tax Due |
Example #2: In 2014, Gwen’s food blog generated $5,000 of revenue and incurred $6,000 of expense, for net 2014 blog LOSS of ($1,000).
Business or Hobby? | Itemized or Standard Deduction? | Additional Tax Due on Blog Income |
Business | N/A | $250 Refund |
Hobby | Standard | $1,261 Tax Due |
Based on this analysis, if you take the standard deduction and your blog is considered a hobby, you’re in the most expensive scenario.
Disclaimer: The information contained within this blog post is provided for informational purposes only and is not intended to substitute professional tax advice.
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Hi Mary! I am an accountant by day and food blogger at night also but my specialty lies in government accounting and therefore I don't know all the ins and outs of taxes and setting up a business. I have been blogging for almost two years now and I am just now starting to get paid for some post. This article has been helpful as I am lost as to how to set up my blog for appropriate tax laws.
Good informatio, thanks to share. it really helped me a lot.
You said if you make a proffit in 3 of the last five years but what if it is your start up year? I blog full time with the intention of making money this year but I did not last year. I can still call it a business right and take the usual write offs for the first year even if it was upside down due to start up costs?
Hey there! That's correct!