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Marketing tax deductions for self-employed individuals
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Marketing tax deductions for self-employed individuals
You can’t make money if no one even knows that you’re selling. And self-employed individuals have it pretty hard. There’s a lot of competition, so standing out is crucial. That’s why small businesses often go heavy on the marketing front, be it online or in-person.
The all-knowing IRS understands this and hence allows certain advertising and marketing expenses to be claimed as tax deductions. You can fully write off marketing expenses that are directly related to getting more attention for your business.
Key takeaways:
- Promotional expenses related to your business can be claimed as tax deductions
- Advertising expenses are tax-deductible, whether they are online or in-person
- Marketing expenses are tax-deductible, whether they are online or in-person
Table of contents
Is advertising tax-deductible?
Any expenses you incur to promote a new or existing business is a tax write-off. Self-employed individuals often don’t claim every expense that comes under this umbrella because they are not aware of how broad this category actually is.
For example, an electrician who works as an independent contractor can pay an SEO specialist to help bring traffic to her website and claim that expense as a tax deduction. If she wears a t-shirt with her logo on it for the front page of the website, the cost of making that t-shirt counts as an advertising tax deduction.
But if she throws his sister a surprise graduation party and talks about his business with the attendees, the cost of that party isn’t tax-deductible, even if he lands some new clients from it. This is because the IRS doesn’t let you write off events that are not exclusively work-related.
There are a few other advertising tax deductions that aren’t so common, one of them being business gifts. Giving potential or existing clients freebies is an easy way to promote yourself and build customer loyalty.
However, according to the IRS, each client gift has a $25 write-off limit. But this limit can be ignored if you’re sending out gifts that each cost less than $4 (pens, keychains), or the gift has your business name or logo that cannot be removed (like a hoodie printed with your logo).
You can also write off certain charity contributions as advertising expenses. Before you get too excited, it’s not that easy. You can only claim a charity donation as a marketing tax deduction if the charity features your business in some way.
This makes that donation a business expense and hence can be written off. Say, for example, you’re a freelance pastry chef who makes a donation to your local women’s shelter. In return, they agree to promote your business during their next fundraising event, allowing you to claim that donation as a deduction.
Just remember, you can only claim this expense if you feel that your contribution is fairly compensated, otherwise it doesn't count.
What advertising expenses are not tax-deductible?
Since advertising is a broad category for tax deductions, it can be tricky to navigate tracking and writing off the correct expenses when filing your taxes. Luckily, FlyFin has an A.I. that can do all the work for you by scanning your linked expenses and finding every eligible tax deduction.
A team of CPAs who are experts in 1099 taxes are available 24/7 on the app to guide you and answer any questions you might have. You can even ask them to prepare and file your federal and state tax returns for you and never have to worry about tax season again.
We used an example earlier about a self-employed electrician throwing his sister a party but still talking to people about his business. That expense was mainly incurred for a personal reason, even though he promoted his services.
Any event that combines your personal and work life is usually not tax-deductible. The IRS has this rule in place to stop people from writing off every party they throw as a tax deduction. But if you have close friends or family at an event that is strictly defined as a work event, then you can claim the deduction.
Writing off vehicle deductions related to advertisements is another tricky thing. If you decide to put a bumper sticker of your business logo on your personal car, you can write off the cost of printing the sticker but not the mileage from driving around in the car.
If you use your vehicle for both work and personal reasons, you can claim the business use percentage of the mileage as a separate business expense, but it won't be related to the advertising or marketing tax deductions.
How can you write off aadvertising and marketing expenses?
Like most other business expenses, self-employed individuals will write off any advertisement tax deductions on Schedule C. These deductions can lower your taxable income and in turn, your self-employment tax. If you’re filing as an LLC or partnership, you will be required to fill out Form 1065, along with the usual Form 1040.
Paying self-employment taxes already requires a lot of bookkeeping. If you’re planning to write off any marketing or advertising costs as tax deductions, you’ll need to keep an even closer eye on your records.
If you use a quarterly tax calculator, you can check whether you owe the IRS over $1,000 in tax liability and correctly plan ahead so that you don’t miss those important deadlines. If you do end up missing one, a tax penalty calculator can be very useful in getting you back on track.
If this sounds like a lot of work, you can always get help. Having a tax professional help you organize your expenses and other relevant information can be a game changer during tax season.
What’s FlyFin?
FlyFin caters to the tax needs of freelancers, gig workers, independent contractors and sole proprietors. It offers a host of cutting-edge tax tools that help you quickly find deductions. You can also use tools like a home office deduction calculator.
FlyFin uses an A.I. to track all your business expenses automatically and find every possible tax deduction.
Once you have all your possible deductions in one place, our CPA team files a guaranteed 100% accurate tax return for you. It saves you a couple of thousand dollars and a ton of time on your taxes.
Download the app and have your taxes filed in minutes, saving time and more money on your taxes than last year, guaranteed.
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