Smart tax tips and strategies for influencers in 2024

Tax tips and strategies for influencers in 2024

In this article, we’ll go over what tax forms you may have to use, what tax deductions may be available for influencers, how to keep track of expenses, quarterly estimated tax payments and whether you need to pay tax on gifts from corporate sponsors or clients.

Do influencers pay tax on their income?

The answer is yes. Your income as an influencer will likely fall into the passive income and active income buckets, so we’ll cover these briefly, but always work with a tax professional on accounting for your different income streams.

It’s important to note that the IRS has standards of material participation to differentiate between active income and passive income. We will go into detail about the differences between the two below. Your Tax Pro can go into these more in-depth to make sure that you’re reporting the correct type of income.

These are some key examples of what the IRS calls “material participation.” At this point, the IRS would consider it “active income,” and tax accordingly:

• If you’ve dedicated more than 500 hours to a business or activity from which you’re gaining income.
• If your participation in an activity has been “substantially all” of the participation for that tax year.
• If you’ve spent up to 100 hours working in the business, and that is at least as much as any other person involved.

The IRS often taxes passive income at the same rate as pay received from a job. This could be anything from earning income on an online course that you created, or earning money from a platform like TikTok or Instagram on views, or sales from posts you created in the past.

As with active income, it’s possible to use deductions to lessen the tax you pay. We will go into some of the deductions available below. Typically, passive income is subject to your usual marginal tax rate, which is based on your tax bracket.

What tax forms do influencers use?

Whether you’re creating video content, selling online courses, writing a travel blog, or anything in between, you are obligated to report your income to the IRS.

If you are employed full-time and have a side hustle as an influencer, you would receive a Form W-2 from your job, as well as Form 1099-NECs for your influencer work from each client, advertiser, or partner that pays you. You will have to report all income streams.

However, if you are a full-time influencer, you are considered self-employed and wouldn’t receive W-2s from the companies with whom you work. Because you are self-employed, you won't receive a W-2 from the companies that sponsor you. You should receive instead just Form 1099-NECs from the various companies that have paid you over $600 throughout the year. If you’ve been paid at least $20,000 and had at least 200 transactions through a third party, such as a company paying you to promote their products, you can expect to get Form 1099-K.

You must still report any income you received "under the table" or as direct payments and not reported on a 1099-NEC or 1099-K.

In all cases, you will need to file Form 1040. You will also need to include Schedule 1 and Schedule C, Profit or Loss from a Business, with your tax return as a self-employed taxpayer. These are the required forms when you are self-employed. You may need other forms, such as Schedule 2, Schedule SE, Form 4562, and others. If you’re not sure which documents do or do not apply to you, ask a tax professional for help. Jackson Hewitt’s Tax Pros can help you figure out which deductions make sense for your specific work situation.

How to keep track of income and expenses as an influencer

You’ll want to keep track of all your income and expenses as an influencer. You may choose any recordkeeping system suited to your business that clearly shows your income and expenses. You may want to use some type of virtual bookkeeping software to keep a log of all the money flowing in and out.

Whether virtual or not, your recordkeeping system should include a summary of your business transactions. Your books must show your gross income, as well as your deductions and credits. For most influencers and small businesses, the business checking account may be the main source for entries accounting for all your inflows and outflows of cash. Always work with a tax professional for tips and best practices for keeping track of everything.

Tax deductions for influencers

For all self-employed workers, including influencers, deductible business expenses for taxes must be both “necessary and ordinary,” according to the IRS.

That means the expense must be:

• Common and accepted in your business or trade
• Appropriate and helpful for your business or trade

Deductible business expenses may include the cost of paying for a designer, capital expenses such as a camera for pictures and/or videos, and other expenses. Keep the following potential business expenses for taxes in mind and save your receipts and records throughout the year to maximize your self-employment deductions.

Equipment and software expenses for influencers

Most businesses have two types of supplies. There are office supplies such as pens, pencils, notepads, calendars, etc. and certain eligible work supplies that are specific to a job.

If you live stream yourself painting, for example, you could deduct supplies such as paintbrushes, cleaner, tape, canvases, etc. As a content creator or influencer, you may need certain tech equipment, such as cameras, ring lights, etc.

Keep track of your expenses and always keep your receipts for anything that you purchase to use to build your brand or business. This will help you lower your income taxes and self-employment taxes when it comes time to do your tax return.

Travel expenses

If you travel as a content creator or influencer, you may be able to deduct travel expenses. This can include transportation and lodging, as well as incidental expenses such as laundry, phones, maid service, and other expenses.

If you use your vehicle to travel for location shoots or to create content, you may be able to deduct maintenance and repairs for vehicle upkeep and expenses—this may include expenses such as oil, registration fees, insurance, parking fees, tolls, and depreciation (if you own the car or truck), or leasing costs. You can choose to claim the standard mileage deduction which only requires you to keep mileage records for the year.

Be sure to keep a log of all job-related vehicle expenses, including miles driven for business and your total mileage for the year.

Home office expenses

To be able to deduct home office costs, your space must be dedicated to work, such as creating videos or doing live streams, etc. For example, if you set up your laptop and work at the kitchen table where your family also eats dinner, that’s not deductible. A room appointed solely for your work may be eligible for a self-employment tax deduction, though.

Within your home office, you may be able to deduct expenses such as the business percentage of electricity, mortgage interest, equipment, real estate taxes, and home maintenance. You’ll need to know how big the space is and how that compares to your whole home to calculate an exact deduction.

Qualified Business Expense for influencers

As an influencer, you might be eligible for a deduction of 20% of eligible income before taxes. 

The Qualified Business Expense (QBI) is one of the most common tax write-offs for self-employed workers. For tax year 2023 (filed in 2024), this type of deduction will be available to taxpayers whose taxable income falls below $182,100 for individuals, or $364,200 for joint returns and certain taxpayers with higher business income.

QBI is income from a trade or business in the U.S., such as rideshare driving, consulting, e-commerce, or reselling income. The QBI deduction does not include wages earned as an employee and business-generated capital gains, interest, and dividend income.

Quarterly estimated tax payments for influencers

The IRS requires increased withholding from other jobs or quarterly estimated tax payments for self-employed people. In many cases, if you earned income as a content creator, vlogger, blogger, or any other kind of social media influencing, or you have investment income, you’ll need to pay estimated taxes during the year, or you risk paying penalties when you file your return.

Put simply, when you are an employee, your employer withholds federal and other taxes for you in each pay period. Money typically isn’t withheld if you’re an independent contractor, consultant or other type of self-employed taxpayer in the gig economy. 

For 2023, here's when estimated quarterly tax payments were and are due to the IRS. 

Estimated tax payment schedule

Do influencers pay taxes on gifts?

We all see influencers posting about a new product, or clothes, or any other promotional gift from companies looking for the marketing boost or exposure.  Broadly speaking, if you’re a content creator or influencer who is expected to perform a service in exchange for the gift (such as doing a video shoot or posting to your main grid with specific hashtags) then it may be taxable. There are exceptions and every situation should be evaluated on a case-by-case basis. It’s important to work with a tax professional to make sure everything is accounted for properly.

Being an influencer can come with some excitement and allow you to make money through connecting with an audience on social media, but it also comes with responsibility. Find a local Tax Pro near you today. Our tax professionals can help answer any questions you may have about this tax year and many tax years to come.

About the Author

Mark Steber is Senior Vice President and Chief Tax Information Officer for Jackson Hewitt. With over 30 years of experience, he oversees tax service delivery, quality assurance and tax law adherence. Mark is Jackson Hewitt’s national spokesperson and liaison to the Internal Revenue Service and other government authorities. He is a Certified Public Accountant (CPA), holds registrations in Alabama and Georgia, and is an expert on consumer income taxes including electronic tax and tax data protection.

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