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In the digital age, creating content has become a viable and lucrative career path for many people. Whether you're a blogger, vlogger, podcaster, or digital artist, there are numerous tax deductions available that can significantly reduce your tax bill.
Navigating these tax deductions can be a lot., so we put this guide together highlighting the top tax deductions that content creators take.
Many content creators work from home, and the IRS allows for a deduction of home office expenses. This includes a part of your rent or mortgage, utilities, and even home insurance. The key here is that the space must be used exclusively for your content creation business.
There are two methods to calculate this deduction: the simplified option and the regular method. The simplified option allows you to deduct $5 per square foot of your home used for business, up to 300 square feet. The regular method requires more detailed record-keeping but can result in a larger deduction.
As a content creator, you likely rely on various tools and software to create and distribute your content. Think of things like cameras, microphones, computers, and editing software. Een subscriptions to platforms like Adobe Creative Cloud, Canva, or Everlance can be deducted. These are necessary business expenses.
If you use the software for personal use as well, you can only deduct the percentage used for business.
Internet and phone services are crucial for content creators. A portion of these bills can be deducted as a business expense. Like equipment and software, if you also use these services for personal reasons, you can only deduct the percentage used for your business.
Keeping detailed records of your usage can help substantiate these deductions in case of an audit.
Advertising and marketing are essential for growing your audience and promoting your content. Expenses related to website maintenance, social media advertising, email marketing software, and even business cards can be deducted.
Remember, the cost must be directly related to your business to be considered a deductible expense.
Continuing education and training are vital for staying current in the fast-paced world of content creation. Courses, webinars, books, and conferences that enhance your business skills or industry knowledge can be deducted.
However, the IRS stipulates that these expenses must maintain or improve skills needed in your current business. Therefore, courses for a new line of work are not deductible.
If you travel for your business, whether it's for a conference, meeting, or location shoot, you can deduct travel expenses. This includes airfare, hotel stays, meals, and even tips. However, the trip must be primarily for business.
It's crucial to keep detailed records of your travel expenses, including receipts and a log of your business activities during the trip.
Professional services, such as legal advice, accounting services, and business coaching, are deductible expenses. These professionals provide valuable guidance and can help you navigate complex business matters.
However, these expenses must be directly related to your business. Personal legal or accounting services are not deductible.
If you're self-employed and pay for your health insurance, you may be able to deduct premiums. This deduction is taken on your personal tax return, not on your business return.
There are specific rules and limitations for this deduction, so it's recommended to consult with a tax professional.
As a self-employed individual, you can contribute to a Simplified Employee Pension (SEP) IRA or a solo 401(k) and deduct your contributions.
This not only reduces your taxable income but also helps you save for retirement. The contribution limits for these plans are typically higher than those for traditional IRAs or 401(k)s.
If you have business insurance to protect your equipment or business operations, you can deduct the premiums. This can include liability insurance, property insurance, and even business interruption insurance.
However, personal insurance policies are not deductible as a business expense.
Depending on your location and the nature of your content creation business, you may need certain licenses or permits. The costs of obtaining and maintaining these can be deducted.
Remember to check with your local and state government to ensure you have all necessary licenses and permits for your business.
Bank fees related to your business bank account, such as monthly service fees, transaction fees, and ATM fees, can be deducted. However, fees related to your personal bank account are not deductible.
It's recommended to have a separate bank account for your business to make tracking these expenses easier.
Meals during business meetings or travel can be deducted. However, only 50% of the meal cost can be deducted, and the meal must be directly related to your business.
Keep detailed records of these expenses, including receipts and the business purpose of the meal.
As a self-employed person, you pay both employer and employee parts of Social Security and Medicare taxes, called self-employment taxes. However, you can deduct the employer part of these taxes. This deduction doesn't cut your business income but lowers your adjusted gross income on your individual return , which may push you into a lower tax bracket.
By knowing and using these tax deductions, you can cut your taxes and boost profits. But tax laws are complex and change often. So, it's wise to consult a tax professional. They can help you maximize deductions and stay compliant.
Brad Thibeau is the Head of Partnerships at Everlance, and has held that role since 2021, with a focus on helping self employed people save time and money on their taxes.
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