Blogging as a profession is still a relatively new method of making a living, and it typically involves a great deal of freelance work. Bloggers garner an income through affiliate linking, hosting sponsored ads, writing sponsored posts, and carrying out freelance writing, design, and photography projects on the side—and these are just a few of the ways. The newness of the industry, coupled with the freelance nature of the work, can make it particularly difficult to know how to handle income taxes when tax season hits. Here is what you need to know about taxes and blogging.
Bloggers will need to calculate estimated taxes at the end of the year. This differs from the way in which most traditional employees pay taxes, where taxes are deducted from each paycheck, and they can expect to receive a tax return come tax season. For bloggers, taxes are instead a matter of owing taxes at the end of the year after not having taxes withheld from earnings.
Blogs are now considered by the IRS to be self-run businesses, even for those who work as full-time salaried employees in addition to running a blog. This means that bloggers also need to be mindful of the self-employment tax, which is the combined Social Security and Medicare taxes usually paid by an employee and an employer. As a blogger running your own business, you need to pay for both the employee and employer portions of the tax. Self-employment tax is paid regardless of whether or not you owe any federal income tax.
Keeping track of income
In order to calculate estimated taxes correctly, it’s highly important to keep track of all your income throughout the year as a blogger. This includes any income gained through affiliate linking, sponsored posts, ads, apps, e-books, and blogging-related projects. One great way to keep track of income is to simply create an online spreadsheet and add to it as time passes.
It’s also important to keep track of the expenses that go towards maintaining your blog. Such expenses can include travel to and from blogger events, electronics purchased for blogging purposes, dedicated office furniture, business cards, purchased online ads, website maintenance expenses, postage fees, blog courses, and professional headshots. This can even include a small portion of your rent and utilities if you run your blog out of your own home.
Business as a hobby
One important distinction to make in blogging is whether a blog is run as a hobby or a business. A blog that runs as a true business will have turned a profit outside of all expenses for three of the last five years. If your blog qualifies as a business, you can then count deductible expenses when calculating your taxes.