Blogging for Income: Tax Tips for Bloggers
Bloggers are all over the Internet with subject matter on just about any topic you can think about. They come in three varieties of business:
- They blog as a hobby.
- Their blogging business is a sideline gig while they maintain their jobs.
- Their blogging has reached a level of exposure that allows them to operate as a fulltime business.
What you almost certainly already know is that it does not matter where you fit in those three levels of business, you are obligated to pay taxes on your blogging incomei.
Hobby Blogger – As a hobby blogger, you may just use affiliate marketing to generate income, and for many this revenue often only offsets the cost of hosting and maintaining the blog. There can be little or no income over expenses to report, but the obligation to do so is there. If your activities are considered as a hobby by the IRS, you still must report income and expenses, but with one major drawback.
If you are classified as operating your blog as a hobby, you are only allowed to deduct expenses up to the level of income; in other words, you cannot operate at a loss. There are of course detailed IRS rules as to what is a hobby versus a business, and you can find the IRS documentation on that hereii.
Side-hustle Blogger – For the side-hustle blogger, there can be enough traffic to their blog to begin to generate a profit, with income exceeding expenses. Generally, this is transitional into trying to build a full-fledged business. However, even if it remains a sideline activity, recordkeeping becomes more important due to the likelihood of a profit from operations and the IRS not allowing it to be classified as a hobby.
Keep your personal and business income and expenses separate. You will be required to file a Schedule C with your personal income tax return. Other than a possible business structure decision, you are maintaining records and reporting taxes as a fulltime business would do so.
Fulltime Blogging Business – As long as you remain in operation as a Sole Proprietorship, your recordkeeping and tax reporting will be as explained in the side hustle section above. However, if your business is growing or you plan for it to do so, you may want to consider another business structure or legal entity for legal, liability, and taxation reasons.
- Partnership – This would be if you have other owners or plan to. The partnership reports income to the IRS, but income or loss is passed through to the partners and filed with their personal returns. Generally, the partners share in liability for the operations and obligations of the business.
- LLC, Limited Liability Company – The LLC structure allows the owners to protect themselves and their personal assets from the operation and liabilities of the business, as it is a separate and stand-alone entity for tax purposes.
- S-Corporation – The S-Corp combines the pass-through aspect of the partnership for income to the owners while protecting their assets from the liabilities and obligations of the business.
- C-Corporation – This is a full corporate entity, a full legal entity that separates the shareholder owners’ assets from the assets, liabilities, and obligations of the business. The shareholders are protected from suit for operations of the business. The business is taxed, and distributions to shareholders are taxed again at the personal level.
If your blogging becomes a profitable and growing source of revenue, consider the owners’ requirements and tax situations and make a business entity structure decision. Consult an accounting or tax professional for this decision and future tax consequences.
i Taxes for Bloggers 101, Rycob.com
ii IRS Tips on Hobby or Business, IRS.gov