Being an influencer is fun, exciting, and wonderful. It’s also a job. And just like everyone else with a job, influencers pay taxes. But her similarities with a typical 9-5 end, as the rates, rules, and paperwork influencers must deal with significantly differ.
If you are an aspiring creator looking to be a full-time influencer or do it in your spare time, there are a few things about influencer taxes you need to know to ensure the legal and financial aspects of your work are covered.
Do Influencers Need To Pay Taxes?
Whether you are a creator on Instagram, a TikToker, a blogger, or a YouTuber, if you make income from your online activities, you are considered self-employed. Depending on where you live, tax laws vary from country to country, and income earned from influencer activities (e.g. brand promotions affiliate marketing, advertisements) are considered a taxable income. And as such, you need to report your earning to appropriate bodies and pay a federal income tax.
Additionally, if you are considered an individual running their own business in your country, you may be subject to additional taxes, such as self-employment taxes or goods and services taxes (GST).
Therefore, as a creator, it’s critical that you keep accurate track of your earnings and expenses connected to your influencer activities to accurately report them during the tax season.
What Is The Income Of An Influencer?
The question seems to have an obvious answer, but in the case of influencers, it’s a bit tricky. And here is why: influencers have several revenue streams, and all or some of these streams can be counted as taxable income. Taxable income might include:
- Sponsored posts run for other brands in exchange for payment
- Brand ambassador roles for fixed or varying remuneration
- Commissions for affiliate marketing efforts
- Free products influencers receive from brands in exchange for promoting them
Generally, if an influencer is expected to promote a brand product in one way or another in exchange for money or gifts, there is a chance that, depending on your location, it will be taxable.
Influencer Tax Write-Offs
They say there are two things that are certain in life, and taxes are one of them. Luckily, there is a way to minimize the taxes you pay for your hard-earned income, and it’s the tax write-offs.
Tax write-offs, also known as deductibles, are specific expenses or an amount that you can subtract from your total taxable income, lowering the amount of taxes you owe to the state.
Tax write-offs aim to help individuals and businesses to account for the expenses that arise when earning the income for which you are taxed. These expenses are considered necessary when running the business (or, in your case, cooperating with brands as an influencer). For example, a teacher could receive a tax write-off on their purchase to be used in class from their own pockets.
Similar to taxes in general, tax write-offs are subject to specific rules and limitations, depending on your country, and not all of your expenses will be eligible for deduction.
What Expenses Can I Deduct As An Influencer Or Content Creator?
Now, tax write-offs are common in many areas of business, and despite many creators being unaware, they are also perfectly legal in influencer marketing. Below, we take a look at what tax write-offs are available to you as an influencer and how you can take advantage of them to save money. And the good news is, there are many ways to do just that.
Travel Expenses – In many businesses, travel expenses are written off, and content creation is no exception. This one is particularly useful for travel influencers, who are trotting around the globe to craft and share their content. Tax write-offs here can include transportation, accommodation, meals, entertainment, and more. Please note that to be eligible for travel expense tax write-offs, the experiences will typically be required to have taken place outside of the tax jurisdiction (you will not be eligible for travel tax write-offs for a trip in the US if you are from the US).
Marketing & Promotion – In the influencer world as in everywhere in business, marketing is important. And as such, any amount you spent on promotion, including ads you run on Instagram and Facebook, can be deducted from your total taxable income.
Home Office – Many influencers work from home, and one of the many reasons for this is that in certain countries, home office tax deduction is allowed. If you are working from the home office, you can write off percentages from your rent tax, insurance, mortgage interest, and other eligible payment, but only for the area you use as your office.
Equipment – Equipment you use for work is another essential part of your process of earning income, and as such, is eligible for tax deductions. Cameras, laptops, editing software, and microphones are among the tax write-offs for creators.
Professional fees – Despite being self-employed, you don’t operate your business alone, and may often refer to professionals for help, including tax or legal advice, shooting and editing teams, and more. These expenses are among the ones you as an influencer are allowed to be written off.
Not all of these tax write-offs will be available to you at all times, but they can help you save significant amounts of money on taxes, depending on the type of work you do.
How Do YouTubers Pay Taxes?
When thinking of influencers, first content creators on social platforms like Instagram and TikTok come to mind. But there is another group of influencers that make a comfortable living through longer-form content via YouTube. And as with other influencers, YouTubers are subject to taxation as well.
If you already have your YouTube channel or think of launching one, there are several ways you will earn income through YouTube. These are:
- Watch Page and Shorts Feed ads – earnings from ads displayed on their video content.
- Shopping – Revenue from the influencer’s YouTube Shopping store or affiliate marketing for tagged products.
- YouTube Premium revenue – share of subscription fees from YouTube Premium subscribers who watch their content.
- Channel memberships – Payments from members who get access to exclusive content and other perks.
- Super Chat & Super Stickers – Payments fans make to have their messages or animated images highlighted in live-stream chats
- Super Thanks – Payments fans make to view animations and have their messages highlighted in the video or Short’s comments section.
All this income is taxed, and the platform is significantly involved in the process. YouTube is required by law to collect the tax information of its creators, those living both in the US and abroad, and if they don’t receive that information, they can withhold as much as 24% of their earnings. Creators outside the US need to fill out the digital W-8BEN form to share their tax information with the platform. Despite this, YouTube won’t do your taxes for you: similar to other social media platforms, you need to collect your income and expense information carefully, deduct what can be written off (including the expenses listed above), and pay the remainder during the taxation season.
Do influencers pay tax on gifts?
Many brands give influencers gifts in exchange for promotions or mentions. Typically, when an influencer receives payment for their promotional services, whether it’s in the form of money or a gift (cosmetics, clothing, technology pieces, and whatnot), it will be taxable. However, there can be exceptions, and the situations should often be examined on a case-by-case basis.
What tax category is an influencer?
Influencers are considered to be independent contractors/self-employed, and as such, are subject to the self-employment tax. Most companies, when working with an influencer, set up each creator as a contractor in their accounting. However, this can vary in different countries and per company. Other common tax categories for influencers are “Small Business Owner” and “Other Earned Income.”
When do content creators pay taxes?
When it comes to the timeline of paying taxes as an influencer, there is no single right answer: the taxation season varies from country to country, and the time to pay the taxes for creators typically coincides with this season. In some countries, like the US, the taxation process takes place once a year, while in other countries taxes are paid every three months.
Which tax forms are provided to influencers?
As an independent contractor, you will receive various forms from the companies you partner with, for each cooperation. Please note that these documents will vary per country. In the US, you will receive Form 1099-NEC from each partner who pays you $600 or more. For payments less than $600 Form 1040-NEC is to be filled. Creators earning on YouTube and operating outside of the US will receive Form W-8BEN to share their tax information. To file taxes on gifts, if those gifts are not monetary, you need to assign them a monetary value. Then, complete Form 709, the Gift Tax form to legally accept the gift and ensure that all legal obligations are covered.