If you’re an influencer, you have to think like the CEO of a business. In addition to developing relationships with brands and sponsors, you need to think about the financial aspects of being an influencer. Of course, you’ll need to file a tax return. But there are also proactive moves you can make to reduce what you owe and make tax filing easier.
What’s the tax status of influencers?
Like affiliate marketers, influencers are usually independent contractors. That means they operate and pay taxes like business owners or other gig jobs like Instacart.
Most influencers will work through multiple channels. This means you might get multiple 1099s from different brands or advertising networks.
You might get either a 1099-NEC or 1099-K. A 1099-NEC is for when a company pays you directly. A 1099-K is for when a company pays you through a third-party payment network and the payment network is responsible for sending your tax form.
What income do influencers pay taxes on?
Your business income is your total income from all sources however they pay you. Your taxable income is your business income minus your business deductions and personal deductions.
What income do influencers have to declare?
You need to declare all income from all sources. This might include:
- Direct payments by brands or sponsors
- Non-monetary compensation like vacations or merchandise (at its cash value)
- Payments from advertising networks
- Cryptocurrency compensation
- Cash payments
- Gifts (because they’re not actually gifts if it’s part of a business relationship)
What taxes do influencers pay?
Influencers pay income taxes according to their tax bracket. As an independent contractor, self-employment taxes also apply. The typical rate for self-employment taxes is 15.3%.
What if you don’t get a 1099?
You still need to report income even if you don’t get a 1099.
If you earn less than $600 from a company, they don’t have to issue a 1099. You still need to include that income on your personal tax return.
If you don’t get a 1099 that you’re expecting at tax time, you can just report the amount of income you received from that company.
What tax deductions can you take as an influencer?
You have the right to take a tax deduction for your business expenses. Exactly what deductions you can take depends on exactly what you do.
If you travel, you can deduct things like airfare, hotels, and rental cars. If you drive your own car, you can claim the standard mileage deduction.
For the standard mileage deduction, you need to be away from your home area or traveling between business sites. The IRS doesn’t specifically define home area, but most people either use their metro area or a limit of 50 miles. Here are some examples.
- Trip from home to your studio in the same city: Not deductible because it’s part of your normal commute.
- Trip from your studio to a client’s office in the same city: Deductible as a business trip.
- Trip from your home to another city three hours away: Deductible as a business trip outside of your home area.
If you rent a vehicle locally, such as needing a truck to move equipment or a nicer car to make a video, you can generally deduct those as business expenses. The reason you can is not that it’s for travel but that it’s for some other legitimate business need.
For other travel expenses, it depends on the expense.
- Domestic flights. To deduct domestic flights, you generally need to spend more than half of the trip on business activities based on the number of days. For example, you need to spend at least four days on business on a seven-day trip.
- International flights. The limit drops to at least 25% of the trip to deduct international flights. So on a seven-day trip, you’d only need to conduct business on two out of the seven days.
- Daily expenses. For daily expenses like rental cars and hotels, you can deduct the days you conducted business.
One last thing to watch out for is places that are starting to add a Vehicle Miles Traveled Tax.
There are generally three times you can deduct meals.
- Travel. You can deduct 50% of the cost of your meals on your business travel days.
- Taking clients out. If you take a client out to discuss business, you can deduct 50% of the cost of the meals. You must keep records of both the cost and the nature of the business discussions.
- Essential to your business. If the meal is essential to your business, such as a meal you ordered to do a food review on, you can deduct 100% of the cost. The IRS will want to see proof that you actually have a plan to make money off of the meals you deduct.
Note: For tax years 2021 and 2022, you can deduct 100% of the cost of travel and client meals that are normally deductible at 50%. This is part of the COVID-19 relief measures to help restaurants stay in business.
Home Office Deduction
If you work out of a home office, you may be eligible for the home office deduction. There are two primary requirements.
- Regular and exclusive use. Regular means that you’re regularly using it for business. Exclusive means that you don’t do anything else in your office — not even letting your kids play on your computer at night.
- Principal place of business. Principal place of business does not necessarily mean only place of business. For example, you might have a separate production studio but use your home office for client meetings and administrative work. As long as you use your home office substantially and regularly, it can qualify.
There are two ways to take the home office deduction.
- Standard option. You can deduct your actual expenses based on what percentage of your home you use for an office (by square footage). Your expenses can include mortgage interest or rent, utility bills, property taxes, maintenance, and depreciation. If you claim something that is also a personal itemized deduction, such as mortgage interest, you have to reduce your itemized deduction by the same amount (no double-dipping). If you claim depreciation, you have to pay taxes on the total depreciation you claimed over the years when you sell your home.
- Simplified option. You can deduct $5 per square foot up to 300 square feet. You don’t have to calculate depreciation or pay taxes on the depreciation you deducted when you sell your home. You can deduct your mortgage interest and property taxes as personal itemized deductions.
If you rent or buy commercial buildings, those expenses are generally deductible. Monthly expenses like rent and utilities can generally be deducted when they happen.
If you buy a building, you’ll probably need to have an accountant calculate depreciation. Depreciation means spreading the cost over the life of the building. For example, depreciation of $300,000 over 30 years means deducting $10,000 per year.
Digital Products and Services
You may need to pay for subscriptions or software to do your job. For example, a social media influencer might pay for a premium membership on their social media platform. These are generally deductible in full.
Physical Goods and Equipment
You might need to buy things like video equipment for your content creation. You might also buy items to review.
You can generally deduct these items in full. If you spend more than $1,000,000 per year, ask your tax expert about depreciation.
One thing to watch out for is trying to take deductions for personal items even if you do use them in business. For example, you want a new grill, so you buy a grill and review it. You can technically take prorated deductions for items you use for personal and business use, but in this example, your business use is a few hours out of an item you’ll keep for years. Trying to game the system is what gets people audited and makes the IRS take a microscope to their deduction.
Other Deductions for Businesses
There are a few deductions you can take not just because of your influencer status but because they’re standard for all businesses. These deductions are separate line items on your personal income tax return and don’t go in with your business deductions.
Qualified Business Income Deduction
The QBI deduction allows you to reduce your taxable income by 20%. It applies only to income taxes, not self-employment taxes.
An influencer is a specified service trade or business. This is a technical tax term that means you get a lower deduction if you make too much.
If your income is below the following levels, you qualify for the full deduction. If your income is slightly above the following levels, you receive a smaller deduction. If your income is well above the following levels, you received no deduction.
|Single and Married Filing Separately||$170,050||$182,100|
|Married Filing Jointly and Qualifying Widower||$340,100||$364,200|
|Head of Household||$170,050||$182,100|
You can deduct your health insurance premiums if you are not eligible for a plan through an employer or your spouse’s employer. If you receive the premium tax credit, you can only deduct the portion of the premiums you pay for out of pocket.
One Half of Self-Employment Tax
You will receive an automatic deduction on your income taxes for one-half of your self-employment taxes. This compensates for the fact that employees only pay for half of these taxes, and their employer pays for the rest.
Your business profit as an influencer counts as earned income. You can contribute to an IRA or Roth IRA based on this income. You can also open a self-employed retirement account such as a SEP IRA or solo 401(k) if you want to contribute more to get a larger deduction.
Proving Your Deductions
No matter what deductions you’re claiming, you need to keep proof. Bank statements or credit card statements generally aren’t enough.
You need records of:
- What you bought
- When you bought it
- How much you paid
- The business purpose of the purchase, especially if it is something that could also be a personal expense
How do influencers pay and file taxes?
Most influencers are sole proprietorships who file a Schedule C with their personal tax return. You do not need to file a separate tax return unless you are a partnership, corporation, or LLC taxed as a corporation.
While the tax filing deadline is typically April 15th, you’ll usually need to make estimated tax payments throughout the year.
If you work in a state or city with income taxes, you may also have to file a state or city tax return.
Influencer Tax Calendar
|Action Needed||2022 Tax Year||2023 Tax Year|
|First Quarter Estimated Tax Payment Due||April 18, 2022||April 18, 2023|
|Second Quarter Estimated Tax Payment Due||June 15, 2022||June 15, 2023|
|Third Quarter Estimated Tax Payment Due||September 15, 2022||September 15, 2023|
|Fourth Quarter Estimated Tax Payment Due||January 17, 2023*||January 16, 2024*|
|Receive Your 1099||No later than January 31, 2023||No later than January 31, 2024|
|File Your Tax Return||Tuesday April 18, 2023 (15th is a Saturday; Monday is Washington, D.C., Emancipation Day)||April 15, 2024|
|Extended Filing Deadline||Monday October 16, 2023 (15th is a Sunday)||October 15, 2024|
Estimated Tax Payment Requirements
How much you need to pay in estimated taxes depends on your income.
|Based on Current Year Tax Return||Based on Prior Year Tax Return|
|AGI up to $150,000 ($75,000 if married filing separate)||90% of current year taxes||100% of prior year taxes|
|AGI over $150,000 ($75,000 if married filing separate)||100% of current year taxes||110% of prior year taxes|
How much should you set aside for quarterly taxes?
Setting aside 30% of your business profits is a pretty good ballpark estimate for most people. If you use QuickBooks Self-Employed for your accounting, it will calculate your estimated tax payments for you.
If being an influencer is your side hustle instead of your main job, you can also increase your tax withholding at your main job in place of making estimated tax payments.
How do you make estimated tax payments?
It’s easiest to go on the IRS website once per quarter and pay by direct debit or credit card. You can schedule your quarterly payments in advance, but it takes more time setting up than logging on four times per year to make a single payment.
What tax software should you use?
Almost any commercial tax filing software supports influencer taxes. Even though influencers make up a small portion of working people, filing as self-employed is a very common tax situation.
If you need extra help, most software now includes options to get extra help from a tax accountant when you file.