Is a Blog a good tax write off?

somdave2005

Level 2 Member
I'm a high income earner and gets taxed up the wazoo. Been thinking of starting a blog as a hobby and side business. For those of you with a blog, how is it as a tax write off? What things do you write off?

Here are the things I can think off :

Internet bill
Home office
Computer
Cell phone ( I do research and reading on my phone all the time)
Website costs
Printer /fax machine
 

Matt

Administrator
Staff member
You do get some write off, but not that much. Home office can be decent if you rent, but not so much if you own. It all blows up in 2 years though, as you need to be making a profit in order to avoid the hobby business rules.

I'm not certain, but I imagine that there are rules against creating a business with no intention of profit.
 

Peridot83

Level 2 Member
Reselling is another option where you would get to deduct all those same expenses and more. But it has been brought up before, you can only claim losses for 3/5 years before you don't get to call yourself a business anymore.
 

somdave2005

Level 2 Member
You do get some write off, but not that much. Home office can be decent if you rent, but not so much if you own. It all blows up in 2 years though, as you need to be making a profit in order to avoid the hobby business rules.

I'm not certain, but I imagine that there are rules against creating a business with no intention of profit.
Oh no, don't get me wrong. I do intend to make a profit. No point in starting a business not to make a profit lol. I don't think the tax write off is that much to just start a blog to write off taxes.
 

somdave2005

Level 2 Member
Reselling is another option where you would get to deduct all those same expenses and more. But it has been brought up before, you can only claim losses for 3/5 years before you don't get to call yourself a business anymore.
Not a bad idea, I already do a little reselling. Can even perhaps write off owning a car since you have to use car to buy stuff to resell.
 

thepaul500

Level 2 Member
Can't you only deduct expenses from the revenues/profits of the enterprise? Seems to be a suggestion here to use them as deductions against income from an employer, which I was under the impression was a no-no (I very well could be wrong, I absolutely love giving the gubment extra money every. single. year.)
 

Matt

Administrator
Staff member
Can't you only deduct expenses from the revenues/profits of the enterprise? Seems to be a suggestion here to use them as deductions against income from an employer, which I was under the impression was a no-no (I very well could be wrong, I absolutely love giving the gubment extra money every. single. year.)
If you have a pass through entity then your loses from an active business interest may be used to deduct other income. However, this is when the 3/5 rule kicks in and you must make a profit 3/5 years to do this.
 
There are periodic funny news articles about people get hit with tax bills because they try to deduct vacations by explaining that they're vacation bloggers (http://travelblawg.boardingarea.com/tax-deductions-blogging/). But vacation blogging is, in fact, a business that at least SOME people are engaged in. So theoretically a well-documented trip that is accompanied by actual profit-oriented writing activity would be deductible to the extent it's reasonable and necessary. For example, if you sell photographs on shutterstock or wherever, and you buy a ticket on a gondola and take a picture, and then put the picture for sale on shutterstock, I don't see why the gondola ticket wouldn't be deductible.

But yeah, I assume audits suck. Never had one (knock on wood!).
 

sunchip

Level 2 Member
I did two seasons of American expat taxes. Just thought I would throw in some general advice. Every situation is different and you should consult your tax preparer.

Just some basics from the stuff mentioned here:
-home office (where do you meet clients/customers?)
-mixed use business vehicle (track business/personal miles)
-multi year sched c losses (hobby laws)
-rental losses (*cringe*)
-business travel, entertainment and dining (very strict)

All of these are huge triggers for an audit. Literally numbers 2-6 on the list of IRS red flags. Refundable credits being number 1.

In the gondola example. You could probably get away with deducting the ticket. What comes into play is:
1-how much time did you spend taking photos vs enjoying the ride?
2-was the ticket more than the revenue from the photo?
3-is it really worth your time?

Revenue, revenue, revenue is everything in taxes.

Mixed international business and personal flights are a nightmare in their own right. You need a reason to be traveling. It's not nearly as simple as "oh he's a blogger, travel expenses = allowed". Having said that, a computer decides who the IRS reviews manually. I can almost guarantee blogs are not seen as a credible revenue source to IRS agents. "Travel Blog" just sounds like bullshit so don't expect much leniency.

One last thing. If you use a cut rate tax preparer expect cut rate performance. Tax preparers take on zero liability if you lie to them. Audits are just offseason revenue streams. Meet with a tax professional and then a lawyer before you start any business and get a good idea of what you are dealing with.

Edit: if you MS… probably best to avoid an audit
 
Last edited:

MickiSue

Level 2 Member
Supporter
If you do decide to start a business, be sure to document everything you claim as a deduction--and you can claim deductions against ALL your income, both from your business and your employment, if it's an LLC or a sole proprietorship.

I got the gift of my first ever audit for my business this summer. FOUR YEARS WORTH, from the State of MN. FOUR YEARS.

I had everything I needed, but the copying was a nightmare. A full ream and a half of my own, along with the check records for both my account and the joint account that my bank copied for me. It was well worth the $30/hour they charged--only took them an hour.

I'm still waiting on the results.

Tax law says that you can be audited for three years back, or four, up to Oct 15 of the current year. You have to sign a waiver to allow them to look at the year four years back, past tomorrow, or they'll just go by what they legally have--which is your return.
 

somdave2005

Level 2 Member
If you do decide to start a business, be sure to document everything you claim as a deduction--and you can claim deductions against ALL your income, both from your business and your employment, if it's an LLC or a sole proprietorship.

I got the gift of my first ever audit for my business this summer. FOUR YEARS WORTH, from the State of MN. FOUR YEARS.

I had everything I needed, but the copying was a nightmare. A full ream and a half of my own, along with the check records for both my account and the joint account that my bank copied for me. It was well worth the $30/hour they charged--only took them an hour.

I'm still waiting on the results.

Tax law says that you can be audited for three years back, or four, up to Oct 15 of the current year. You have to sign a waiver to allow them to look at the year four years back, past tomorrow, or they'll just go by what they legally have--which is your return.

wow 4 years! What is your "business" , if you don't mind me asking?
 

MickiSue

Level 2 Member
Supporter
wow 4 years! What is your "business" , if you don't mind me asking?
I'm a wellness coach. And, recently, I created an LLC to invest in real estate, as well as products for resale.

The fact that I had a significant accident near the beginning of 2014 might have triggered it, because I suddenly had higher than usual expenses with training in buying/renovating/selling/renting residential RE.

The amount and type of effort required for my wellness business became overwhelming after the accident, and I've had to dial it back a lot.
 

30French

Level 2 Member
One of the best things about a side gig is that you can start a individual 401k and sock away quite a bit of your profits into it. Otherwise all of your side income is taxed at your marginal rate. If done with a company that allows you to rollover your traditional IRAs into it (e.g. Fidelity), that can allow you to do a backdoor Roth without paying pro-rata taxes.
 

ldylwr

New Member
I am self employed. My concern is social security taxes. At 15% it makes my net effective income tax rate look like small potatoes. I thought I was still on the hook for employer portion even on SEP401k/SEP IRA contributions, but I may be wrong....
 

thedrills

Level 2 Member
Line 27 of form 1040. Ask your tax professional but AFAIK you pay both sides of the tax (employer and employee) but one side is deductible
 

Sesq

Level 2 Member
wow 4 years!
Some states use a 4 year statute of limitations. The Fed's do 3 years unless you underpay by more than 25% in which case its 6 years from the filing date (so people often keep 7 years). If you willfully defraud then it is unlimited.

Line 27 of form 1040. Ask your tax professional but AFAIK you pay both sides of the tax (employer and employee) but one side is deductible
This is correct.
 

somdave2005

Level 2 Member
I'm a wellness coach. And, recently, I created an LLC to invest in real estate, as well as products for resale.

The fact that I had a significant accident near the beginning of 2014 might have triggered it, because I suddenly had higher than usual expenses with training in buying/renovating/selling/renting residential RE.

The amount and type of effort required for my wellness business became overwhelming after the accident, and I've had to dial it back a lot.

I forgot to ask you... You said you use your LLC to invest in real estate AND resell. Is that even possible to combine two different businesses like that into one LLC?
 

somdave2005

Level 2 Member
I'm thinking just reselling as a side business instead of blogging to save on income taxes. That way I know I can meet the government requirement of actually making profits to qualify as a real business as Matt noted.
 

MickiSue

Level 2 Member
Supporter
In answer to your question: an LLC is set up to be what you tell your state government it is. So if you say that you buy, hold and sell real estate and non-real items for resale, that's what the LLC is.
 

somdave2005

Level 2 Member
In answer to your question: an LLC is set up to be what you tell your state government it is. So if you say that you buy, hold and sell real estate and non-real items for resale, that's what the LLC is.

hmmm, didn't know LLC can be mixed use like that. Any advice on how to setup an LLC? did you go through a lawyer?
 

MickiSue

Level 2 Member
Supporter
I have no idea whether or not an attorney is a good idea in your state. In mine, you can pull up the forms and apply online.
 

kingabraham3

Level 2 Member
i've done tax representation work with the IRS. #1 way to get audited: earned-income tax credit, #2: home office deduction.

doesn't mean you shouldn't use it when it's legit, but read up as much as you can (including the actual statutes and regs) and only do it if its actually legit. meaning, assume you will get audited and ask yourself if you can justify the deductions with the "straight face" test, as opposed to the "stretch the legal definition" test. the latter one doesn't fly with the IRS. also you need to document everything.

P.S. this is not legal advice :)
 

MickiSue

Level 2 Member
Supporter
I HAVE a home office, and I use it exclusively for my business. And I still don't deduct it. I don't want to deal with the issues of depreciation on part of my home when we sell in a couple of years.
 

Bury

Level 2 Member
#2: home office deduction.

doesn't mean you shouldn't use it when it's legit, but read up as much as you can (including the actual statutes and regs) and only do it if its actually legit. meaning, assume you will get audited and ask yourself if you can justify the deductions with the "straight face" test, as opposed to the "stretch the legal definition" test. the latter one doesn't fly with the IRS. also you need to document everything.
I was told that the home office deduction has less audit exposure on an 1120-S versus a Schedule C. I believe the reasoning was that 1120-S filers are seen as a "more professional risk class" for lack of better terminology.

Does this line up with your IRS tax rep experience?
 

kingabraham3

Level 2 Member
I was told that the home office deduction has less audit exposure on an 1120-S versus a Schedule C. I believe the reasoning was that 1120-S filers are seen as a "more professional risk class" for lack of better terminology.

Does this line up with your IRS tax rep experience?
haven't enough personal samples to say if that's true, but i've heard that as well. that said if you don't have much "business" income then the 1120 won't help you too much, whereas theoretically a C deduction could lower your AGI that includes your regular job income also.
 

Bury

Level 2 Member
Maybe theoretically, but in practice for W-2 only earners, that 2% AGI floor is a killer.
 

kingabraham3

Level 2 Member
Maybe theoretically, but in practice for W-2 only earners, that 2% AGI floor is a killer.
fair enough. that said, i'm wary of filing s-corp with little income, claiming home deduction expenses, and feeling all that much better about it. Pushing MS limits etc. with CC companies/banks is one thing, messing with the IRS/federal gov is a whole other beast. Whatever you do, please see an accountant or tax lawyer first.
 

Bury

Level 2 Member
fair enough. that said, i'm wary of filing s-corp with little income, claiming home deduction expenses, and feeling all that much better about it. Pushing MS limits etc. with CC companies/banks is one thing, messing with the IRS/federal gov is a whole other beast. Whatever you do, please see an accountant or tax lawyer first.
Oh for sure. I wouldn't recommend anyone do a 1120-S without bonafide business: articles of incorporation, a FEIN, paying the $800/yr CA Franchise Fee, payroll on a regular basis to the sole employee/owner, etc.

e: and oh yeah actual income ;)
 
Top