What do creators need to know about tax write-offs? It’s a great question. You might be wondering whether you should use a standard deduction or whether to itemize your deductions, or what kinds of expenses you can write off. While here at Patreon we can’t provide tax advice (we’ll leave that to the tax pros), we do know a thing or two about how taxes work for creative businesses, and how creators can think about their expenses when tax season comes around.
If you want to get a better grasp on tax deductions for independent creators and creative businesses, we hope these FAQs can help. The only advice we will give: find a tax professional you like to work with. (And pay your taxes!)
Before we get into it, we’re going to hit you with a quick vocab note: You’ll see “write-offs” and “deductions” used interchangeably here and in many sources online. In the U.S., these tax terms can mean the same thing. If you are located outside the U.S., it’s worth checking with local expertise.
When are creators eligible for business tax deductions?
The great news: If you run a bonafide creative business, you’re likely to qualify for business tax write-offs. That means you can deduct eligible costs associated with your creative work, as long that creative work is part of that creative business.
The caveat: If your creative work is considered a “hobby activity” (more on that next up) and not a business, you won’t be able to write off business expenses, but you’ll still need to pay tax on money you’ve made from your creative work.
What’s the difference between a creative business and a hobby activity? How do I know if my creative work is a business or hobby?
Let’s go straight to the source on this one. The IRS says: “A hobby is any activity that a person pursues because they enjoy it and with no intention of making a profit. This differs from those that operate a business with the intention of making a profit.”
Basically, if you’re creating something and sharing it with others in order to make money, you’re on track to full-fledged business status. Doing things like advertising and marketing, keeping good books, and formally registering as a business (such as an LLC or S Corp) help make it official. Running an actively promoted e-commerce store or a Patreon page? Ding-ding-ding! Business!
On the other hand, if you have a personal creative practice and once in a while you offer to sell your work to someone who’s interested or you’re just looking to defray costs, the IRS probably will deem that a “hobby activity.” That’s because you’re not building business or financial structure around the creative work, even if you occasionally make a few bucks. For more info on creative businesses vs. hobbies, check out this article from the IRS.
While “making a profit” colors the IRS definition, don’t worry if you’re not rolling in it just yet. A business doesn’t have to be profitable right this very minute to qualify. If you’re making a clear and verifiable effort to run a creative business, that’s the indicator, not whether or not you made rent off your creative work just yet.
Got it — I definitely run a creative business. So what kinds of expenses can I write off on my taxes?
There are lots of standard expenses creative business owners may be able to deduct on their taxes, just like other self-employed folks or small business owners. This includes things like:
- Cell phone bills (if you’re using your phone for your business)
- The space you work in and the utilities that power it
- Start-up expenses
- Equipment (and equipment depreciation in some cases)
Some other common deductions include eligible meal and travel expenses, your internet bill, certain insurance premiums and other tax payments, and more. And then there’s the day-to-day kind of stuff: office supplies, marketing and promotional materials (from flyers to business cards to promoted social posts and advertisements), your business’s digital infrastructure and tooling (web hosting fees, software licenses, and the like), and necessary legal and professional services, like the cost for annual tax preparation.
Last but not least, many of the tools, materials, subscriptions, continuing education, and some of the support you pay for to produce the creative work your business is organized around can typically be deducted. We’ll dig into that more in a minute.
If you split any expenses between personal and work use — maybe you just have one cell phone rather than a separate work phone, or you’ve set up a dedicated studio in a room of your home—you’ll only be able to write off an appropriate portion of the overall expense. (Keep in mind the special rule around writing off a home studio/home office, namely that it needs to be a dedicated area specifically for this work.) Maintain good records of things like utilized square footage in your home or what percentage of your phone usage is for your business, so a tax professional can help you get the numbers right on your return.
What kinds of professional development materials can creators write off?
You can deduct all sorts of expenses around learning and development materials (think classes, workshops, publications, and related) as long as the learning ties directly to your current work and creative business.
Here’s an example: Say you’re a game designer, and you want to write off an advanced Unity workshop or attend an educational lecture by a legendary game maker — you’re golden, as it’s clearly related to your current creative career. But that “Ravioli Making 101” class you took for personal enrichment? No write-off there. (Well, unless maybe you’re making a game about stuffed pasta.)
Work with your tax professional to categorize your expenses, and in the meantime, keep your receipts! Lots of fun and interesting things that help you stay in tune with your industry, learn from other creators, and keep up to date with trends or the competition will fit the bill. For instance, if you’re an independent fashion designer, you might write off things like fashion magazines or tickets to a runway show; a playwright can write off theater tickets or a subscription to an industry quarterly, etc.
What about the stuff I use to actually produce my creative work? What kinds of supplies and materials can creators write off on their taxes?
If your creative business requires equipment, supplies, products, or tools to make your creative work, whatever it is, those things may well qualify as deductible business expenses. Here are a couple examples to get you thinking.
Example A: Performance and recording artists, musicians, actors, dancers, comedians, podcasters, and filmmakers can typically write off expenses like recording and film equipment, instruments, relevant software costs, and, if your work has you in front of cameras or on stages, stage makeup and costumes, along with costume care like alterations and cleaning. Makeup and costumes should be screen/stage-specific. Jeans and T-shirts won’t cut it, but if you’re in a role requiring full Victorian regalia, add it to the bill.
Example B: Visual artists, crafters, and fabricators who run creative businesses can usually deduct the cost of art, craft, and fabrication supplies (paint, pens, pencils, paper, canvas, clay, fabric, felt, metals, and so on), tools and equipment (easels, pottery wheels, sewing machines, welding equipment, soldering irons, saws, hammers, etc.) and necessary repairs, protective and safety equipment (steel-toe boots, googles, masks, thimbles, etc), framing materials, and so on.
Creators may also be able to write off costs for things like personal assistants and schedulers, union dues, agent fees, audition tapes, submission/reading fees, and the postage and shipping it takes to get physical creative work to customers.
To wrap that up with a tongue twister: when your business is creative, the cost of making creative things is a business expense.
What else should creators know about taxes?
Most importantly, that they’re not so scary. Work with a tax professional to sort out the right tax deductions for your tax return, and then file those taxes.
P.S. This article is intended as knowledge-sharing, not tax, financial, or legal advice. Always consult with tax/financial/legal professionals to determine what’s best for your business.