I have heard this question voiced so many times: which business expenses for bloggers are tax deductible?
Many business expenses that bloggers incur are similar to other fields, or 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. These supplies and materials expenses will be the focus of our discussion today.
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Can you deduct blogging supplies and materials as a business expense?
Most blog niches (DIY, home décor, food just to name a few) rely on blog posts with a project of some type. Spending money on supplies is necessary in order to offer tested instructions and beautiful step by step photos to your readers. Readers don't flock to a DIY blog with no projects or a food blog where no food is made! But all the supplies, materials, and ingredients can really add up! How much can you treat as a business expense? What can you deduct on your taxes?
Why am I qualified to talk about business expenses and taxes? I am an accountant, and I do have my CPA license. However, the tax code is lengthy and complicated, and I do not presume to know everything about taxes. The advice offered here is my opinion. I have done my best to present accurate advice that is well researched based upon my knowledge and the resources provided on IRS.gov, however you must use your own best judgement and that of your tax professional when preparing your tax return.
What does the IRS say?
Although the IRS tax code covers many topics in depth, they have yet to publish any definitive guidance to bloggers on how to specifically handle many of the financial situations that bloggers encounter every day. In the absence of direct guidance, we must lean on general tax advice to determine what constitutes a business expenses for bloggers.
According to the IRS, a business “may deduct ordinary and necessary expenses for conducting a trade or business.” The IRS deems ordinary business expenses as any that are “common and accepted in your trade or business.” So ask yourself, what do others in my industry have as business expenses? The IRS views necessary expenses as those that are “helpful and appropriate for your trade or business.” The IRS does state that an expense does not have to be “indispensable to be considered necessary.”
The other area related to expenses that you need to be careful about is determining whether an expense is truly for a business purpose, or whether it has a personal use as well. Some items are both personal and business related. The IRS does allow you to pro-rate and deduct the business portion on your tax return.
For the purpose of this discussion, keep in mind “business expense” and “tax deductible” are interchangeable terminology.
Business Expenses for Bloggers
Let's discuss a few examples that I made up!
Let's say you are a home décor DIY blogger who is re-painting a table you bought at a thrift store. You are taking step by step photos as you go along, and do a nice post about the table when you are done. The table then becomes a permanent fixture in your home. There are several things to consider when deciding what is tax deductible. In my opinion, most likely many of the supplies required to repaint the table are tax deductible. These materials were an ordinary and necessary expense in order for you to blog about fixing up the table. Some of these materials might include sand paper, primer, or paint. And most likely any left over will be used on future blog projects. The table is where it gets trickier. Although the table was ordinary and necessary for your blog post project, you now use the table everyday so it certainly has a personal component. You might consider allocating only a portion of the table as a business expense. If however you are a blogger that fixes up furniture and then sells it, or you gave the table away when you were finished, then it seems as though the entire cost of the table would be tax deductible.
Lets say you are a food blogger who blogs only about cake. Each time you go to the grocery store, all the food you buy for your family to eat for their every day meals is not tax deductible just because you have a food blog. The ingredients you buy to make your famous German Chocolate Cake which you blog about would be tax deductible. If your son is having a birthday party, and you need several cakes for the party, so you buy the ingredients for 3 of your famous German Chocolate Cakes, then I would say that only the ingredients for one chocolate cake are tax deductible, not for all three.
I would urge you to err on the side of caution. Don't push the envelope to see what you can get away with. Be conservative on what you deem is ordinary and necessary for your blog, and what is for personal or business use.
Keep Excellent Records
It is also important to keep excellent records. When you go the grocery store and purchase the ingredients for your german chocolate cake along with your families groceries for the week, pay for the german chocolate cake items in a separate transaction. This is where keeping your business finances separate is important. I discussed this in Episode 46. Jot down on your separate receipt what the materials or ingredients were for. Possibly even mark down the date the blog post went live. The more information you can provide to substantiate that these items were for a business purpose, the better.
What About Sponsored Posts?
In the case of a project you do for a sponsored post, I think you can make a stronger argument that the expenses you incurred were ordinary, necessary, and purely business related. Expenses incurred for the direct production of revenue are more than likely deductible, and often these purchases are not items you will continue to use for personal use. They are items you needed in order to complete the project and get paid by the sponsoring company.
Although I'm sure you wish I was able to give you a much more straightforward answer, I hope you now have the tools to judge for yourself which items are deductible on your tax return. Each bloggers situation will be different due to what they blog about, and each post will need to be evaluated based on the IRS criterion for business expenses. Remember to ask if the expense is ordinary, necessary, or of a personal nature.
I discussed this tax issue as well as several other tax topics with Abby of Just a Girl and Her Blog as part of her Building a Framework video series of 16 experts. Abby interviewed many bloggers on their area of expertise, and has compiled a great resource for other bloggers.
In addition, to learn more about taxes for bloggers check out my E-book, The Blogger's Simple Guide to Taxes: A Guide to Saving Time and Money.
You can also find other accounting and tax related small business topics on our Small Business Accounting and Tax Help Pinterest Board.
You can find me in our private Facebook group if you have questions related to this topic. To join the Facebook group, just sign up for our email list and you'll receive an invitation by email within a week or two.
In accordance with IRS Circular 230, we advise you that any discussion of a federal tax issue in this communication is not intended to be used, and cannot be used, by any recipient, for the purpose of avoiding penalties that may be imposed on the recipient under US Federal Tax Laws.