Wise Bread Picks
ShareThisAnyone here like doing taxes? Didn’t think so. We all have to do them; we all have to pay money to Uncle Sam (although some get away with paying much less than others). But as a freelancer and/or a blogger, are you overlooking dozens of legitimate deductions that could save you a whole lot of money?
I own a small business (very small, it’s just me) and it basically involves doing some writing for advertising, marketing, the web and of course, blogging. None of this will ever replace my full-time career, but it does eat up various costs that my accountant has told me I can deduct from my taxes. And when I looked into it further, I found not just a handful of possible deductions, but a veritable smorgasbord.
Here are the expenses you should look into deducting if you’re a blogger and/or freelancer, assuming they apply to your chosen blogging or freelancing field (you can’t deduct movie tickets if you have no reason to be at the movies…but if you have a blog all about movies and reviews, go for it).
As always, you need proof of this stuff. No good saying you bought 50 magazines last year if you can’t find the receipts. With the government hemorrhaging money, they’re looking for any opportunity to keep as much of your cash as they can. In the event of an audit (aaarggghhh) you want your finances to be watertight.
It’s also worth noting that your expenses shouldn’t really outweigh your income (although sometimes it's inevitable in your first year of business, taking into account start-up costs and so forth). But, if you made $1500 from your blogging adventures, writing off a $3500 computer system may trigger a big bad red flag. The IRS doesn't like it when you spend more than you make. And if in doubt, double check with an accountant.
- Industry books & periodicals, including audio books
- Other books and periodicals used for research
- Library book charges
- DVDs and CDs related to your blogging
- Movie or theater tickets, if related to your blogging or freelancing
- Music and TV show downloads
- Magazine subscriptions
- Research sites that require a subscription
- Further education classes
- Webinars
- Business podcasts
- Business-related websites (for me, that would be Adweek)
- Memberships to professional clubs and affiliations
- Internet access fees (at about $40 a month, that’s a biggie)
- Public internet access fees (Internet café’s, airports etc)
- Stock photo purchases for your blog
- Search Engine Optimization services and fees
- Paid site submissions
- Website hosting fees
- Website design and/or maintenance fees
- Website/blog templates
- Domain name cost(s) and renewals
- Blog expenses (e.g. WordPress additions)
- Film & Digital cameras
- Web cameras
- Handheld video recorders
- Digital memory cards
- Recordable CDs and DVDs
- Zip drives
- Photo printouts
- Film & film processing
- Printer ink and copier toner
- Phone charging stations (e.g. at the airport)
- Second phone line for your business/fax machine
- Long distance charges related to business
- Cost of phone/fax/scanner/copier equipment
- Cell phone & PDA expenses (bills, equipment, accessories)
- Personal voice recorders and memo machines
- Business equipment rental
- Computer equipment & peripherals
- Computer upgrades (I had to upgrade my RAM twice last year)
- Depreciation costs of computer equipment
- Data storage (both online and external HDDs)
- Any business related software (not games…unless you review them)
- Software licensing fees
- Anti-virus and anti-spam subscriptions
- Unpaid invoices. If you do some work for someone, be it a simple blog article or a much bigger job, and you get stiffed on the bill, you can write off your loss.
- Fees for other bloggers and freelancers. If you get overwhelmed and pay a friend or relative to help out, any money you pay that person for their assistance is a tax deduction.
- Tax and accounting software
- Tax preparation fees
- Business incorporation costs
- Costs for Trademarks or Copyrights.
- Business logos and graphic design fees
- Business cards, letterhead and other stationery (even stuff you print yourself)
- Office supplies (everything from paper to paper clips)
- Home office expenses. You can deduct the part of your home you use exclusively for blogging or freelancing as an expense, including a portion of the rent, water, heating bills and so on.
- Percentage of your home insurance (for your home office)
- Online self-promotion fees (that includes banners and Adwords costs)
- Trade show fees
- Advertising costs (newspapers, stickers, posters, postcards etc)
- Photography fees (e.g. headshots, pack shots etc)
- Photocopying/faxing fees
- Transportation costs: car mileage; airline tickets; taxis; buses; trains.
- Highway tolls
- Parking fees
- Hotel costs for business trips.
- Cleaning & laundering services when traveling for business.
- Costs of conferences, plus all related expenses (e.g. BlogHer)
- Health insurance costs (if you’re self-employed)
- Computer equipment insurance
- Food and drink purchased on business trips
- Client entertainment (be reasonable…not sure you’ll get away with Strip Club deductions)
- Postage costs (Stamps.com is ideal for keeping track of postage, and the service itself is tax-deductible)
- PayPal and Western Union fees
- Post Office Box fees.
- Safe Deposit Box fees.
- Self-storage fees, especially useful if your files and records are spilling over into your garage and you need extra space.
- Advice. Any professional advice you pay for that pertains to your business is a tax deduction, and that includes counseling or coaching.
- Membership dues to labor unions (do bloggers have a union?)
- Charity work or donations (this one’s tricky. It’s limited to your out-of-pocket costs, not the final cost of the product. In my case, I’ve done some writing for charity, which is not applicable because you can’t deduct time spent. But any materials used during your charity work can be deducted).
- Prizes and giveaways. Here at Wise Bread, we give away some very nice things. Often, they are generously given to us as gifts to pass on to you, or readers. But when we go out and spend money on a prize to give away, that can be deducted, as well as the cost to mail it out to you.
- Business furniture. If you use it exclusively for your blogging or freelancing, then anything from a chair or filing cabinet to the whole desk can be written off.
- Business functions. If you hold a little get-together for clients, even just one or two, then everything from the rental of the room (or golf course…know what I mean?) to food and drink can be deducted.
- Business lunches. You can't include your own meal, but if you pick up the tab at a power-lunch (or just a meeting with a potential client) you can write off their part of the check.
- Props. I sometimes use props for photoshoots, and the cost of those props can be deducted.
- Job search expenses. Any money you spend trying to get work, from postage to travel, is a deductible expense.
- Alcohol and drug abuse treatment. If the pressure turns you into a Betty Ford patient, you can deduct the expenses of treatment. Let’s hope you never have to though.
- Any losses due to theft. Away on business, your laptop gets stolen…write it off.
- Moving expenses related to your blogging or freelancing.
- You can deduct 50% of your self-employment tax
- Home improvements. Turn the basement into a home office, those expenses are deductible.
- Clothing and accessories. If you have to buy any clothing for a particular job (maybe you needed protective clothing & headwear to write an article about a building site) then those costs are also deductible. But don’t try and write off your new Gucci watch.
- Business checking expenses. If you have anything more that free checking, it’s a deduction.
- Business gifts. This is cool. If your mom watched the kids while you went off to do an interview or write an article, and you then bought her flowers or choccies, well, the gift is tax deductible. Very sweet.
- Annual fees for business credit cards.
- Physical therapy. Writing for eight hours a day can cause all sorts of problems, including the dreaded Carpel Tunnel Syndrome. I've been advised by many accountants that you can deduct the cost of that therapy. However, medical expenses are a complex beast, and usually need to be a percentage of your income. Check with your accountant for details.
- Headache pills, eye drops and so on. If staring at the screen all day gives you a killer migraine, you can write off the cost of the meds to help you get through it and keep on working.
- Wages. Say you pay your kid $20 a month to empty your office trash can, maybe as a way to earn an allowance. Well, you can deduct that expense.
- Your dog. No kidding, if you can prove it's a guard dog and is protecting your equipment, you can write-off the doggie expenses.
- Net operating loss. If your deductions outweigh your earnings, which often happens in your start-up year, you can use that loss to lower your taxes next year.
And one big final deduction you may want to think about:
- Your TV cable or satellite bill. I can deduct it because I need it…I work in the movie business. It’s a very nice deduction, too. If you blog about soaps, movies, TV shows, or anything else in the entertainment field, this could be a nice write-off for you.
It's a big list, but even if only 25% of it applies to you, it could add up to a nice chunk of cash back in your pocket. And before I get chastised, I'm not against paying taxes. But when corporations are finding ways to jump through every legal loophole and pay almost no federal tax, I don't think it hurts you to take the legitimate tax deductions on the table.
Go stake your claim.
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Thanks, great list!
One question: If we use the internet (or cable, ect.) for both business and personal use, can it still be a write-off? Must we deduct the percentage of business use - i.e. I use the internet 50% business, 50% personal, so I can deduct half the cost?
A rule of thumb I always tell my clients is "you need to be able to justify the expense as the cost of doing business." If you cannot, with a straight face, say this is why I spent the money to help with my business, then don't attempt the deduction. Also to consider it a business, you need to actually receive income from it. Otherwise it's just a hobby and not a business tax deduction.
As with most of these business/personal crossovers, it seems like a gray area. However, this article may help with your answer.
I didn't even realize how much I could reasonably deduct on my taxes as a business expenses. I especially like #98. Daughter gets .50 to dust my desk and empty my trash once a week.
Great post. I need to get focused on my taxes too. I bookmarked it for future reference thanks.
what exactly can you deduct for office supplies? i have been told that coffee, creamer, paper cups, candles, picture frames, etc, etc can be considered as office supplies. is this correct? i have a home office. any advice will be greatly appreciated. thank you .....janet
I think you're OK. If it's your own cup of Joe, I don't think it counts, same as business lunches. But again, check with an accountant to make sure.
Very thorough and helpful Paul, thanks.
Great post!
I like doing my taxes when I get some money back! Which I minimize by watching earnings and adjustg withholding.
1. I don't like lists that are stretched so thin to make it to 100 items.
2. A lot of these should have been qualified.
These are all good tips. I find it important to note that unless your business expenses exceed a certain percentage of your adjusted gross income (AGI) you can't deduct a thing!
You need to make sure you divide the time into personal and business use. Typically, according to 2008 tax law, a cell phone must be for strict business use only in order for your monthly charge to be deducted, same thing with internet expenses for the whole home. Long-distance and pay-per calls that can be tabulated individually for business expenses can be deducted. Watch out on number 90, there are strict rules for what can be considered a home office; it must be a room in the house solely dedicated to your business ventures- the kitchen table space doesn't count, nor does the living room, nor does the family "computer room." Also, as NumbersGuy says, watch out for the difference between a hobby and a profession. If you only dedicate a few hours a week to a website and happen to make $1000 bucks a year, it's most likely a hobby, in which nothing is deductible.
I'm not yet certified (CPA) so your best bet is to make note of which of these points you believe applies to you and speak with your certified accountant.
"97 Headache pills, eye drops and so on."
The IRS does not allow deduction of nonprescription drugs as a qualified medical expense. Furthermore you can't normally deduct medical expenses as business expenses. You could get around this by setting up a HSA though. But if you just try and write in aspirin as a misc. business expense it won't fly.
I'm also pretty doubtful you can get away with #99. Its creative but I can't imagine the IRS would allow that for typical home businesses.
I like this list, but does anyone have a manageable system that would work in order to keep track of these expenses throughout the year that is easy to implement? The IRS is a my nemisis, and I am currently in a rush to get my tax return filed and it seems like mission impossible. I have so many papers and recipets that arent really organized. Any suggestions?
The "starving artist" is a romantic stereotype. We all love the rags-to-riches overnight success stories, but while we're working for that day, it makes sense to be fiscally prudent and savvy.
Don't forget the membership dues and fees (for networking events) related to professional organizations.
Ummmm...no 13?
Great list. Definitely worth saving.
I have a software giveaway for Taxcut 2008 this week. Anyone interested, come by my blog to get a copy. http://frugalnyc.blogspot.com/2009/02/freebie-taxcut-premium-software.html
A Section 105 Health Reimbursement Arrangement (HRA) plan can help out as well. For one thing, it makes taking ANY health related item as a 100% deduction easy AND legal. Vitamins, tylenol, mouthwash, health club dues, running shoes, glasses, eye exams, plus all the 'usual' expenses (unreimbursed medical expenses) can all be deducted. Any accountant should be able to help determine if you're eligible for a 105 (works better for spouses) - my wife and I have a 105 for our business and it costs about $250 yr. to administer, but we saved almost $3200 in taxes. The 105 was created specifically to help the small business person. And, no, it's not like a Section 125 Flexible Spending Account (Cafeteria Plan)...there is no 'use it or lose it' with a 105.
Easy one first: #47 -- you cannot deduct income you did not receive. If you report on the accrual basis, then maybe an unpaid invoice is deductible.
Keeping track: http://www.smallbizsurvival.com/2008/05/easiest-accounting-system.html At this site (Small Biz Survival), we continually write about all things small biz.
Check us out.
Well, it's a stretch, but you could deduct that. However, there's a lot more to it. Then you would have to do all the other things associated with having an employee... such as pay their unemployment and social security taxes. Also, if you claim your child as an employee, then you'd have to comply with child labor laws.
Do I need to incorporate my blog as a business or can I just claim the deductions against my regular income?
Thanks so much. That was really helpful!
Very nice post, thanks so much for sharing.
Awesome resource; thank you for this.
Any chance of an update for 2010 filings? How much is this usually affected by changes in tax law? I know it's next to impossible to predict, especially now, but I'm trying to figure out how behind I am in saving--first year self-employed.
Thanks again.
Yeah, but where do you deduct these things? Schedule C? Under which category?
For #47 how do you deduct an invoice you get stiffed on for doing work for someone? I understand how you can do that if you put out money on product and are not paid. But how does it work if you are doing writing and other labor, but are not paid? Does it already have to have been taken as income in your accounts receivable?
I own a small business (very small, it’s just me) and it basically involves doing some writing for advertising, marketing, the web and of course, blogging. None of this will ever replace my full-time career, but it does eat up various costs that my accountant has told me I can deduct from my taxes. And when I looked into it further, I found not just a handful of possible deductions, but a veritable smorgasbord.
Edwin Kyalangalilwa
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If I don't have all my receipts, do records of my purchases in my bank statements suffice?
This is a great list. I'm always surprised at the variety of expenses that can be tax deductible. You just have to be vigilant and organized to maximize your benefit.
How/where do you deduct 50% of your self-employment tax? That doesn't make sense. Love the idea, but I don't get it.
These are all good tips. I find it important to note that unless your business expenses exceed a certain percentage of your adjusted gross income (AGI) you can't deduct a thing!
This list is very nice, but will probably get plenty of people audited and when they lose it will be taxes plus interest and penalties. Business use of home is "exclusive business use." means no non-business activities in the space. It is also an audit red flag. I am defending 2 people in home office audits while we speak. You can deduct meals and entertainment, but only 50%. Drug rehab is a medical expense subject to 7.5% of AGI and you must itemize; the strip club, but only 50%,.#86 Misc. Itemized deduction subject to 2% of AGI etc. etc. Good Luck
Don't rely on this list as tax advice, several of these are flat out wrong. Just as an example, a cash based business can never write off unpaid invoices as an expense. Spending money (expense) and not making money (unpaid bill) are very different things.
I love this article! I recently just wrote a post about working as a freelance filmmaker and what to do come tax time--and I like your list of deductions, but if you want to know what to do AFTER you have that list, and what kind of software there is to ease the freelance workflow come tax time, check it out:
http://michaelschandler.com/blog/freelance-finance-tips-business-account...
Nice read, keep posting!
Michael S. Chandler
www.michaelschandler.com/blog
That is a great list, thanks!
Great list, will definitely be using some of these for my taxes!
Great list here but to be on the safe side I'm going to hire a CPA since I made a big profit this year.
Awesome tips!! I have been worried all year about my freelance work since it isn't taxed upfront. Here's to hoping this tax season isn't a nightmare!!
Wondering...you say clothing for a particular job. So if you're blogging about fashion and show a blog of a particular new blouse, can you write off that blouse?
Curious - I use hotspot data from my cell phone to work while I'm away from home. This is a HUGE chunk of change each month (nearly $200!) do you see any issue with writing this off?
The monthly bills are there, the breakdown of my phone from the rest of the family - my data is high, I pay for 12 gb and use more each month.
This will probably save me my EIC if I'm able to write that off, so I'm curious to what you say.
Thanks.