It's tax time again in the US and you know what that means, time to pay up. First off, let’s put out the standard disclaimer that I’m not a tax attorney or an accountant and you should always consult a professional if you are unsure about your tax filings. Also, if you haven’t been paying taxes on your YouTube income, you should be. Whether you are making a little or a lot, you should treat YouTube like a small business to be taken seriously by the IRS. If you made at least $600 from your videos this past year, you should receive a 1099, which means you better tell the IRS the whole story on your income, because they already know it.
All of the information you need to make informed decisions are available from the IRS and there are a wide variety of things you can deduct from your taxes. If YouTube is your full time job you should be taking advantage of every tax break you can get. But let’s be clear on one thing. Above all else, do not mess with the IRS or intentionally stretch the truth to increase your returns. The last thing you want to have is an audit that you can’t back up.
Do not forget to claim sole-proprietor on your taxes. This will allow you to subtract things related to your business. This is the first, simplest, and most overlooked part of the whole process. Even if you have formed an LLC, you can still claim sole-proprietor and get the added benefit of protecting your personal assets.
YouTube Business Expenses: What Can You Claim Back?
The blanket term from the IRS on what you can deduct is any "ordinary, necessary, and reasonable" expense that helps you earn business income. A simple way to determine if you’re making a good claim is to give it the laugh test. If you can put it on your forms with a straight face, without thinking you are pulling one over on Uncle Sam, it’s probably a fair return. The IRS has clear guidelines regarding the expenses you can claim, including:
#1 Tax Deductible: Equipment Depreciation
Cameras and an editing computer are some of the most expensive pieces of running a YouTube channel. Fortunately you can often deduct the cost of this equipment over the course of 5 years as depreciation. Generally you can deduct 20% off of equipment each year for 5 years and since 2012 there has been a law made that allows for claiming 50% depreciation on the first year of owning the equipment. As with all of this advice, make sure and check with the IRS or a CPA before making any claim.
#2 Tax Deductible: Advertising
Are you using services like Promoted Videos on YouTube to advertise your content and gain viewers? If you don’t have an advertising budget, that’s a great place to not only expand your audience, but gain a tax deduction as well. You can also deduct the cost of prizes from contests and giveaways as they are very closely related to advertising.
#3 Tax Deductible: Home Office Use
It used to be a major red flag to use your home office as a tax deduction. This practice is becoming more and more commonplace and isn’t as frowned upon by the IRS anymore. So if you have a space in your home dedicated to YouTube, even if it’s a hobby, you may be eligible for a pretty sizable deduction. The key here is to ensure that you clearly use the space for YouTube in such a way that you could say the space is used exclusively and on a regular basis. This could be as simple as one day a week for production, but those two key words are the main criteria for the IRS.
#4 Tax Deductible: Cell Phone Usage
Do you have a cell phone dedicated to your YouTube channel? If you regularly use your phone for networking or managing videos and comments it could qualify for a deduction as well.
#5 Tax Deductible: Professional Advice
Did you seek any help for getting your channel off the ground? Maybe you’re worried about filing your tax returns and want to hire them done to make sure they’re right. Any experts whom you pay to help guide you in making sound business decisions are tax deductible.
#6 Tax Deductible: Gas mileage
You may not think it as most of your YouTube action takes place at home, but YouTuber Michael Warbux says the most overlooked item is gas mileage.
Between driving to airports, driving to pick up supplies, or even driving to do a collab. It's all for the business. I always save EVERY receipt, and if I have questions, I ask him if I'm able to write it off.
#7 Tax Deductible: Conference Fees
With the increasing cost of conferences like Playlist Live and VidCon, it’s nice to know that these conferences are tax-deductible. Not only the cost to attend the conference itself, but just about any expense related to it from food, hotel room, cab rides, airfare and even the business cards you hand out that get thrown away by the end of the conference.
#8 Tax Deductible: Video Editing Software
Are you still using Windows Movie Maker? Upgrade to something better and write it off on your taxes. Software used for your business may be tax-deductible.
#9 Tax Deductible: Data Storage
Let’s face it, data storage can get expensive for YouTubers. How big is your hard drive? How many external drives do you have? Do you use a cloud based storage service? All of these things could be tax-deductible and save on the huge bite taken out of your budget for file storage. I have a stack of external HDs on my deck used specifically for YouTube, all tax-deductible.
Non-Tax Deductible Items (But Check With a Professional)
There are so many more things you could be claiming, so when it doubt, consult a tax professional. But there are also some things to avoid.
Just because you were driving to a collab doing 100 miles an hour doesn’t excuse the ticket you got as a business expense. Don’t try claiming it.
Your Home Telephone Line
If the primary purpose of your phone line, whether a cell or land line, isn’t business, don’t even try claiming it. The phone line used for general home use is not tax-deductible.
If you primarily work from home, your pajamas are not tax-deductible. Well, probably not. Unless the clothing is required for a uniform or specific to producing videos, you shouldn’t be deducting them. Remember the last test? Try and say, “I’m deducting my underwear from my taxes”. Did you laugh? If not you should have and you should not be deducting them on your taxes.
Large Expenses (Depending on Circumstances)
For the most part, no item is too big to be tax-deductible. However, the size of the purchase relative to the need and size of the business is important. Section 162 of the tax code sort of lays the ground work here but owning a yacht to record YouTube videos isn’t necessary, but leasing one as a set for a video may possibly qualify. Don’t just blow money thinking you can write off everything.
This is the general, catch-all bucket the IRS will be looking for if you get audited. If something is more of a personal responsibility than a business one, you’re going to get red flagged. There is a right way and a wrong way to go to Aruba and have it count as a business expense.
The most important piece of advice I could give is to track everything you do related to your YouTube business. Hire a CPA and at the end of the year have them review all of those details you’ve kept track of to see what does and what does not quality as a business expense. It will not only help you reduce your risk of being audited, but if you do get audited you’ll be able to calmly present all of the information needed to prevent an audit from wrecking everything you’ve worked towards.