So you’ve started your own podcast. What started as a passion project has turned into a full-time occupation. Your subscribers are growing, and you’ve even started collecting sponsorship and promotion offers from brands.
And now that you’re making money, it’s time to start thinking about your tax debt.
Podcasting may be a relatively new profession, but that doesn’t mean Uncle Sam won’t pick you up at tax time. You are legally self-employed, meaning you are subject to the same tax laws that apply to other jobs, such as Blogger.
Unlike traditional employees (also known as W-2 employees), self-employed podcasters are expected to have their tax debts under control. It is important that you put some of your income aside to cover your taxes.
We’ll walk you through everything you need to know about podcasting taxes, plus tax deductions and exemptions to save money.
What Counts as Podcast Income?
All income that comes from your podcasting business must be included on your federal income tax return.
For tax purposes, income includes both monetary compensation (be it from sponsorship, partnerships, advertising, crowdfunding or sales of goods) and non-monetary compensation such as goods and services. You may also need to report gifts from sponsors.
Is Podcasting a Business or a Hobby?
It depends. Just because you make money doesn’t automatically turn your podcast into business. To answer this question we need to look at the Difference Between Hobby and Business.
The Internal Revenue Service (IRS) defines a company as an entity that «benefits». Hobbies are now being pursued “for sport or recreation, not to make a profit”. The IRS also examines a list of factors such as profit motivation and the way you work to determine whether your podcast is a business or a hobby.
This distinction is important because a bona fide company can deduct its expenses and claim a net loss when it is not profitable. However, if the IRS regards your podcast as a hobby, you can only deduct up to the amount of income you have made. You cannot deduct expenses that exceed your total income.
Do I need to track my podcast expenses?
Yes! You cannot claim any tax deductions if you do not have the appropriate documentation. Accurate records can also help protect you if you have been selected for an IRS audit.
Make it your business to keep track of all of the money you spend producing your podcast. This includes podcast-related courses you’ve attended, advertising costs, software subscriptions, hosting and rental fees, and new equipment. If you’ve hired an independent contractor like an influencer to work on your podcast, you can claim that as a legitimate business expense too.
You can also deduct travel expenses for live shows for events. For example, if you’re traveling to another city to record your podcast, you can deduct the cost of meals, flights, and accommodation.
Keep all receipts (whether printed or electronic) for all podcast-related expenses and purchases. While you don’t have to include all of the paperwork on your tax return in order to claim deductions, you do need to be able to provide evidence of your expenses if the IRS requests it.
What podcast taxes do I have to pay?
As a general rule, the IRS considers podcaster to be Self-employed. However, to be legally considered self-employed, you must earn $ 400 or more a year from freelance work. You will need to pay your standard income taxes based on your tax bracket and enrollment status.
You must also a. pay independence 15.3% tax rate to cover your Social Security and Medicare (FICA) contributions. Usually, employees and employers share the FICA tax. However, self-employed are considered business owners by the IRS. And since you are working for yourself, you have to pay the full tax.
What tax deductions for podcasters can I claim?
Podcasters can use tax deductions to reduce their tax liability. Be sure to speak to a tax advisor about any deductions for expenses related to your podcasting work.
For example, if you’re recording or producing your podcast at home, this is the Home office deduction allows you to claim a portion of your household expenses such as utility bills, internet bills, phone bills, mortgage interest, insurance costs, and occasional repairs as real business expenses.
For example, if your podcast studio takes up 10% of your total living space, you could potentially take up 10% of your total household bills. In the event the IRS pays a visit, you’ll need to draw up a floor plan for your home office.
Other podcast-related expenses that you can claim include software subscriptions and purchases, marketing expenses like Facebook or Google ads, office supplies, new equipment (e.g., computer, microphone), and business meals.
Keep all invoices and receipts in a safe place. If possible, write down each expense in a ledger or spreadsheet to show that you mean business. Since you cannot rely on anyone, it is important to keep accurate and detailed financial records.
As a podcaster, you are expected to keep an eye on your finances in addition to building your online business. But if you’re new to self-employment you may not know what to do next.
To ensure that you are maximizing your deductions and minimizing your tax liability, check with them Tax experts at TFX. You can get advice over the phone or have your tax return drawn up by an experienced auditor – it’s your call.