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Are my subscriptions tax deductible?
Are my subscriptions tax deductible?
One of the best parts of working for yourself is discovering new expenses that you can write off to lower your taxes. You’re probably aware that you can write off your home office and travel expenses, but what if we told you that you could also write off your subscriptions?
That’s right, if you work as an independent contractor, freelancer, gig worker or any kind of self-employed individual, you can claim certain publications and subscriptions as tax deductions when you file your taxes. Use this self-employment income tax calculator to plan ahead and find industry-specific deductions.
But of course, the IRS never makes it totally easy. These subscriptions still have to assist you in operating your business in some way for you to claim them. So you could potentially write off Netflix on your taxes, it just has to make sense for your line of work.
Key takeaways:
- Self-employed individuals can write off subscriptions
- This deduction can only be claimed if it is relevant and/or essential to your business
Table of contents
Subscriptions as a tax deduction
So, subscriptions are a legitimate tax deduction but you have to jump through a few hoops before you can write them off. Generally, you can write off any expense that is “ordinary and necessary” for your business.
But subscriptions aren’t always a necessary part of someone’s work. So, is Spotify a tax deduction? An Uber driver who pays for Spotify every month to make the drives more pleasant for their passengers can claim it as a deduction.
And even though that expense isn’t technically necessary for the job, it improves customer experience and could get the driver a better rating, which could lead to more business. On the other hand, a freelance social media manager can’t say that her Spotify subscription is tax-deductible even if she uses it everyday while working. Using a 1099 taxes calculator is an easy way to find relevant business expenses you can deduct.
What kind of subscriptions can I write off?
Self-employed individuals can typically write off just about any kind of subscription as long as it helps them run their business. But since the IRS doesn’t really have a set list of deductible subscriptions, it really depends on what you do for work.
A freelance legal consultant might pay for a membership at a local law society for research and networking purposes. This membership fee can be written off. But if a self-employed artist pays for the same membership just because they are interested in going to law school, that expense is not tax-deductible.
This is because every subscription that is written off must be essential to your current business, and not to a career you are looking to pivot into. If you use an app like Flyfin, an A.I. will scan your linked expenses and find every tax deduction you can use.
If you want more specific advice, you can reach out to the team of CPAs who are experts in 1099 taxes, and are available 24/7. They can also help you by preparing and filing your federal and state tax returns.
Knowing what subscriptions you can write off can also be helpful if you have to make estimated tax payments every quarter. You can use a quarterly tax calculator to check whether you’ll owe the IRS over $1,000 in tax this year.
If you’ve somehow missed a tax deadline and weren’t able to pay on time, don’t worry, the IRS isn’t going to send you to prison. Just use a tax penalty calculator to calculate your total penalties and try to pay them off as soon as you can.
How can I calculate my subscription tax deduction?
We’ve talked a lot about the different types of subscriptions you can write off, but now we’re going to tell you how to actually do it. Depending on your line of work, you can either claim a 100% tax deduction on a subscription or calculate its business use percentage.
Let’s say you’re a self-employed nail technician. You have your own studio and have Netflix playing in the background while you attend to your clients. This qualifies you to write off your subscription as a tax deduction.
But since you also watch Netflix in your personal time, you’ll need to calculate your business use percentage. Say you have Netflix films streaming in your studio five hours a day, five days a week for a total of 100 hours per month., You also use it for personal use in your down time about 60 hours a month, on average. Together they total 160 hours per month.
To find your business use percentage, you just have to divide the number of hours you use Netflix for work by the total number of hours you use Netflix each month and multiply that by 100. For this example, that gives us a business use percentage of about 63%. So, that means you can write off 63% of your Netflix subscription at the end of the year.
If you also pay $22 a month for Photoshop, which you use only to edit and post your nail art pictures to your Instagram account, you can claim a 100% tax deduction on it since you only use it for your business. You will report all these deductions on Schedule C, on Box 27a under “Other expenses.” This form is filed as part of Form 1040.
Claiming these types of expenses as tax deductions is a useful way to lower your taxable income. Make sure to always keep consistent records of your usage and your business use percentage calculations so that you’re not left scrambling 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.
Expert tax CPAs ensure 100%-accurate tax filing
A.I. finds every tax deduction, eliminating 95% of your work
On average users save $3,700
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