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Can You Deduct Your Social Media Costs?
Your digital marketing efforts may yield a break from Uncle Sam.
While we all spend plenty of time scrolling through our Facebook feeds during our lunch break, entrepreneurs are using the next step of social media to introduce brands, market to customers, and share company news. Did you know that certain costs related to social media and business can be tax deductible? If you’re depending on LinkedIn, Twitter, and other digital tools to grow your company, make sure not to miss out on the tax advantages you deserve.
An accountant can help you determine what qualifies as a small business deduction in the eyes of the Internal Revenue Service. “For business expenditures to be tax deductible, the IRS requires that an expense is ‘ordinary and necessary,’” says Cory Robinson, a certified public accountant based in Dacula, Georgia.
Not sure whether your tweets qualify for these kind of tax breaks? Here are some tips to help you figure out whether your social media expenses add up.
Look to your blog as a source of deductions. With so many companies depending upon blogs to promote their services and create a buzz about products, the wages you pay to writers and the money you spend on sponsored posts are often costs of doing business. “Fees paid to bloggers are tax deductible,” says Nakeicha Adams, accountant and CEO of Union, New Jersey-based firm N Adams Finance. Just remember that non-employees who earn $600 or more must receive a 1099 form.
Consider the costs of social networking. “If you’re using social media for the purpose of growing your business, you may be able to write off subscription fees as marketing expenses as well,” says Adams. Some charges you may be able to deduct include the costs associated with LinkedIn Pro, Constant Contact, Hootsuite and Raven Tools. If you spend money to advertise on Facebook or Twitter, those social media costs could be tax deductible business expenses as well. “Expensify and Shoeboxed are two great apps that allow you to track your social media expenses,” says Adams.
Single out fees paid to social media managers. “Many costs associated with creating, updating, or maintaining sites that promote your trade or business can be written off,” says Adams. That could include money spent on training employees or sending your marketing staff to a social media conference. If you hire outside consultants to manage your social media accounts, their wages would likely also be tax deductible.
Be sure to separate business from pleasure. Social media costs are only deductible when they are being used for professional purposes; so if you’re only using it to keep up with your college buddies, don’t think about writing it off. There are also no tax breaks for managing your Facebook and Twitter feeds yourself. “The most valuable asset that small business owners have is their time,” says Robinson. “Unfortunately, the time spent on social media promoting a trade or business is not deductible.”
Consider the fact that tax rules change. Social media sites and what they offer are continuously evolving. As businesses find new ways to market and network online, the IRS may make adjustments to keep up. “I always recommend irs.gov, because they are the main source for most tax related information,” says Adams.
As companies spend more time in the digital space, it’s important to make sure you take advantage of as many tax breaks as you can. “Social media has become an effective way to market one’s business and stay informed in areas that are specific to a business owner’s industry,” says Robinson. “[Many] expenses associated with maintaining these connections are tax deductible.” And why wouldn’t you take advantage of that?
Want to learn more savvy business strategies? Take a look at our business resource center. And, one of the smartest business decisions you can make is being proactive about protection. Connect with an agent today to learn about customized coverage for your business.