Influencers pay taxes just like everyone else. Being self-employed makes things different than working for a traditional 9-5 that issues a W2 each year. There are different tax codes, forms and deductions that apply. Always consult with a tax professional when you have specific questions, but whether you only make a few bucks as an influencer or have made it your full-time job, here are things about influencer taxes you should know:
Do influencers pay taxes on their income?
When it comes to taxes for content creators, if you make money as an influencer, the IRS considers you self-employed, which means you pay federal income tax on your earnings. Your income is listed on Schedule C, which details your profits and losses.
You’ll also pay state income tax unless you live in a state with no state income taxes.
What counts as income?
There are several different revenue streams for influencers, all of which are subject to taxes. Taxable income might include money made from:
- Sponsored posts or content creation
- Brand ambassador roles
- Affiliate marketing commission
- Ads
- Free products
Do influencers pay taxes on gifts?
It’s common for brands to send influencers a free product to try and promote. If the product is worth more than $100, influencers have to pay taxes on it. If it’s worth less than $100, taxes aren’t levied against it.
To be safe, influencers should keep a detailed list of all products given to them throughout the year. Write down the company, product, and its current market value.
What tax forms do influencers receive?
If you earn more than $600 with one agency or company, the brand will send you a 1099-NEC, which you’ll report on your taxes. If you make less than $600 with a brand, you won’t receive the form, but you still need to report the income.
If you collect income through a third-party vendor like Paypal or Venmo, you’ll receive a 1099-K if you collected more than $600. This is a new tax rule in 2023 and applies to taxes filed in 2024.
Influencer tax write-offs
As an entrepreneur, you can write off expenses related to your business if the IRS considers it a business and not a hobby. Traditional deductions include:
- Internet
- Smartphone
- Camera or video equipment
- Laptop and accessories
- Subscriptions or software, like design platforms or social media schedulers
- Office supplies
- Advertising costs
What if you’ve lost money as an influencer?
If you’ve put more money into your budding influencer business than you’ve made, you’ll show a loss on your taxes. That’s OK. However, the IRS may deem your business a hobby if you report continued losses over consecutive years. If that happens, tax deductions (like your internet or new laptop) aren’t allowed.
Are there tax savings for influencers who set up a certain type of business?
There are several types of businesses that any self-employed person can set up, but there is an option that could provide influencers with tax savings. By setting up an LLC with an S Corp as the tax election, your income is taxed differently.
The S Corp designation means your income is split into two buckets: your salary and distributions. What’s the difference? Your salary is an amount you decide to pay yourself. Tax rules say it must be a “reasonable rate.” Any other income you make beyond your salary is called a distribution.
Your salary is subject to income tax and self-employment taxes, which include Medicare and Social Security taxes. The other part of your income, distributions, are only subject to income tax, not self-employment taxes, which can be big savings.
However, this isn’t a viable option for every influencer. Experts say it’s a good choice for influencers who make at least $60,000 in net earnings, equating to a $40,000 salary and $20,000 in distributions. You’d pay income tax and self-employment tax on $40,000, but only income tax on the $20,000.
Of course, you should always speak with an accountant to ensure this choice is best for your business. This S Corp Calculator can also help.
How should influencers keep track of income and expenses?
If you plan to make money as an influencer consistently, it’s best to set up a business checking account. Use this account for anything related to your influencer business. When you get paid, deposit the income into this account and then transfer it to your personal account. You’ll pay for expenses out of this account, too.
Your business and personal accounts are separate, so gathering information for tax time is simple. You won’t have to sift through statements because there’s a record of all business transactions in the account. It’s a good idea to use accounting software, too.
Whether you’re filing taxes for the first time as an influencer or have years of experience paying the IRS in this role, it’s always best to work with a certified CPA to ensure you understand the rules that apply to you and pay the proper amount.
