Influencers might seem like they live pretty charmed lives. Creating content and receiving free gifts and trips all the time? Sign me up! Even more so, influencing can be a pretty lucrative career with even niche Instagram influencers and YouTubers regularly making 6+ figures. But before you rig up your ring light, remember that taxes can be a majorly complicated ordeal for these types of freelancers. Some of the biggest headaches come from trying to figure out what counts as taxable income and what expenses can be written off.
Perhaps one of the biggest surprises is that the generous PR packages influencers receive do count as income. The fair market value (FMV) of all products received in a gifted package should be considered income when filing taxes. “But that’s just a gift they shouldn’t have to claim income on that!” As Dwight Schrute would say, FALSE. It’s not a gift – the courts have ruled that something is only considered a gift when it’s given with “detached and disinterested generosity.” Companies send gifts to influencers in hopes they will talk about the products to their followers and most of the time they do. It’s essentially a lucrative and cost-effective marketing campaign for companies to send free products for ‘review’ instead of paying for sponsored content or large-scale campaigns. With this underlying incentive in mind, these PR packages do not meet the criteria of a gift.
While content creators are self-employed and thus subject to their own self-employment taxes, there are other benefits to their self-employed status. There are a variety of write-offs available for any small business, including content creation. Some typical write-offs include electronics, domain and hosting fees for your website, supplies and insurance. As always, be sure that these expenses are both ordinary and necessary for running a successful business before attempting to write them off. The IRS can use your social media in an audit and you’ll need to keep clear records to prove these expenses.
Next time you watch an ‘unboxing’ or ‘get ready with me’ video, imagine that all of that product can count as income. This is on top of the income influencers receive from brand partnerships, social media platforms, and other sources. Keeping track of your taxes as an influencer can be a full-time job! If you need assistance with bookkeeping or tax planning, feel free to contact ClarkSilva. We are well-versed in tax matters big and small and a team member would love to chat with you today!