Top 10 OnlyFans Tax Write Offs for Online Creators
You are an OnlyFans content creator who is preparing to file your taxes for 2022, or maybe you just want to make sure that you have included the most important deductions in your tax filings. Those 1099 forms are unforgiving and that 15.3% tax rate can consume a sizable chunk of your yearly earnings. Add to that, if you have not been making your quarterly tax payments, you may have some penalties and interest due. In America, a pay-as-you-go tax system, taxes are due when you get paid, not at the end of the year, like it is for salary and hourly workers.
Are you an OnlyFans Business Self-Employed Content Creator?
The top ten business deductions for OnlyFans content creators are for self-employed content creators who treat their OnlyFans accounts like a business. When deciding if you should treat your OnlyFans account like a business or a hobby, ask yourself why you have the account and what you expect from it. If it’s for fun, a form of self-expression, an experiment in social media, and/or something you do on occasion, it’s a hobby you should look at the tax deductions that apply to hobbies. However, if you are trying to earn money from your OnlyFans account, want to grow it into a revenue-generating business that replaces your current job (if you have one), or it is your job because you’re unemployed, then it’s a business and this article is for you.
Types of Deductible Expenses
The U.S. Internal Revenue Service (IRS) allows self-employed people (a.k.a. independent contractors) to reduce their gross income by subtracting certain kinds of expenses from it. The expenses, referred to as ordinary and necessary expenses, are the costs paid by independent contractors to establish, operate, maintain, promote and market their businesses. The expenses are deductible because they are costs incurred in the operation of the business that reduces the income received by the content creator. So, instead of punishing content creators for spending money to create, run, and grow a business, the IRS lets you recoup those expenses and only taxes you on the remaining income, your net income.
Your net income is taxed at a flat 15.3 %. You will only be required to pay this tax if you earn US$400 or more in 2022. As a prudent business operator and hardworking independent contractor, it is your duty to reduce your tax burden as much as possible, so that you keep as much of your income as possible.
Ordinary vs. Necessary Expenses
Let’s briefly review ordinary and necessary expenses. Ordinary expenses are the predictable expenses that a content creator will have to pay just to run the business. These expenses include rent, utilities, business insurance, Internet fees, phone fees, office supplies costs, etc. Necessary expenses are those that, although not absolutely required to run the business, make it easier to operate, more productive, and more profitable. IRS rules define these expenses, but there are always exceptions.
Better Safe Than Sorry
If you think that you are an exception to the rule, you are advised to seek tax advice from an accountant or CPA who can give you a professional opinion on whether the IRS will agree with you. If you’re thinking that the risk is worth it to keep more money in your pocket, think again. As a self-employed content creator, if you are wrong about allowable deductions, and you underpay your taxes, you will be paying horrific fees to correct those errors. The IRS can demand the owed taxes, charge you a penalty for not properly paying your taxes, and charge you interest that continues to accrue until you pay your back taxes and all associated fees and penalties. This is one of those instances when it is better to ask for permission than forgiveness.
Top 10 OnlyFans Tax Write-Offs for OnlyFans Content Creators
This section describes the top 10 tax deductions for OnlyFans content creators. The expenses are not divided into ordinary and necessary expenses. Whether some of them are ordinary or necessary may depend on the kind of OnlyFans content you create for your customers. The top ten tax deductions are listed below.
- Business Home Office Use
- OnlyFans Platform Fees
- Travel Expenses
- Insurance: Business and Health
- Software and Apps Fees
- Professional Services
- Phone and Internet Fees
- Staging Supplies
- Advertising and Marketing Costs
- Payment Processing Fees
Let’s review the top 10 OnlyFans tax write offs for content creators in more detail.
Business Home Office Use
If you are using space in your home to run your business, the space is only used for your business, you can deduct expenses associated with maintaining it. Associated expenses may include rent, mortgage payments, property taxes, utilities, property insurance, maintenance, and repairs.
Other deductible expenses relate to the technology that you use to run your business. In short, you can deduct the costs of computers, printers, big computer screens, cameras, cameras, editing equipment, and anything else that you use for your business. Whether you are getting a partial or complete deduction depends on if you use the equipment outside your business. If you get personal benefits from using the equipment, then you cannot get a full deduction. Also, the cost of some things cannot be deducted during the tax year. Instead, you will have to deduct an item’s depreciation over time.
This is an area where you want to be careful how you calculate the numbers and then maintain records, receipts, and documentation of the expense, how you itemized it, and why you made that call. If you are ever audited by the IRS, you really don’t want to be staring an agent in the face while trying to calmly explain why you made certain deductions and having no idea why you did it (yes, you will most likely forget, especially after 1 or 2 years).
OnlyFans Platform Fees
To use the OnlyFans platform, you must pay platform fees. Those fees are deductible as operation costs. If you opt for specialized services from the platform, those fees are deductible too as long as they are related to your business. When deciding on platform services for your business, take down notes on why you selected specific services, why you thought they were valuable, and how you planned to use them in your business.
If you would like to read the Ultimate Guide to Taxes for Onlyfans, click here to read now.
Deductible travel expenses include all travel expenses associated with running your business. If you use your personal vehicle for OnlyFans business (e.g., shopping for costumes, buying business supplies) then you can deduct part of your vehicle-related expenses. For your car you can deduct a portion of the costs related to mileage driven, repairs, maintenance, car insurance, parking, tolls, and gas.
Besides deducting costs related to your personal vehicle, you can write off travel costs when you take trips to promote, market, or conduct your business. These costs include hotels, taxis, rental cars, airline tickets, meals, etc. Any travel-related expense associated with conducting your business can be written off.
Insurance: Business and Health
The insurance premiums you pay for your business and health insurance can be written off. Business insurance covers any workplace injuries, accidents, or other unforeseen things that affect your business. Health insurance premiums covered include yours, your spouses, and your dependents. This can be very helpful if you are the primary or only income earner in your household and those insurance premiums are taking a big bite out of your income.
Software and Apps Fees
The money you spend to pay for software and apps used for your business can be written off. If you bought software or subscriptions for bookkeeping, video editing, image editing, image filters, cloud services, data storage, and/or d a design app (e.g., Canva), you can write off the expense. In addition, if you are paying fees for using social media platforms (e.g., Discord, Twitter, YouTube) to promote and market your business, then you can deduct those fees too. Of course, this includes the costs of antivirus programs, encryption software, and virtual private networks.
If you are able to hire professionals to manage parts of your business for you, it makes sense that you’ll do it. The professionals stay up-to-date on the laws, their interpretation, industry-related technology, and can do their specialized jobs a lot faster than you. Plus, if they make a mistake, they have professional insurance that fixes it for you. Whereas, if you make a mistake, the cost to fix it comes out of your pocket. Thus, the IRS allows you to write off the costs of professional services. Professionals that you might be using as an OnlyFans content creator are video editors, website designers, accountants, bookkeepers, tax advisers, consultants, lawyers, notaries, business coaches, photographers, lighting experts, etc. As long as their services are associated with the operation of your business, you can write them off.
Phone and Internet Fees
You must have Internet access and a working phone to operate your OnlyFans business. The Internet access allows you to work with the OnlyFans platform, contact customers, do your marketing and promotions, and create content. Moreover, you may opt for premium Internet services, with high-quality advanced equipment to dramatically decrease your upload and download times and have a stronger and more reliable Internet connection. As for your phone fees, whether you use a landline or cell phone, the costs associated with maintaining them and paying their service subscriptions can be written off. They are simply the cost of doing business as an online content creator.
Note, unless you use your Internet and phone services strictly for your OnlyFans business, you most likely will not be able to deduct the entire cost of the services. You should only deduct a percentage of the cost of these services if you use them for your own personal benefit. The key here is to determine what percentage of the cost should be deducted and written off by your business. In situations like this, you are advised to consult with a tax adviser, CPA, or accountant, before assigning a percentage. Arbitrarily assigning a percentage of the cost to your business can cost you more money than you would have spent if you had just not bothered with the write-off.
OnlyFans content creators usually make the majority of their income from a small percentage of their customers. Those customers often want the content creator to provide exclusive or niche services to them. To provide the requested, high-value services the content creator may need to purchase special clothing, props, decorations, wigs, makeup, music, etc. The cost of the items bought to fill the customers’ requests can be written-off. This can only be done if you are not using these items in your personal life. Otherwise, deduct away and keep copies of each customer’s special request with notes about the items purchased and their cost.
Advertising and Marketing Costs
To make money on OnlyFans, people need to know that you are there, what you do, and why they should spend their time and money on you and your services. Well, to answer these questions in your potential customers’ minds, you must promote yourself, services, and your brand. This is where great platform promoters and markers are worth their weight in gold. Whether you pay others to do your promotions and advertising, the money spent on it can be written off.
Advertising and marketing expenses include the costs of ads run on Google, Facebook, Instagram, and other types of social media. They can also include the costs of printing flyers, running radio ads, running video ads, creating podcasts, doing collaborations with other professionals. Essentially, any activity that you engage in that is intended to promote, market, develop, and/or maintain your brand can be written-off as a business expense.
Note, check with a tax adviser before doing free guest appearances at private dinners, clubs, and events that you must pay for but are not an honorary guest or speaker. For example, if you spend a lot of time and money attending popular venues, you may find that the IRS deems that a personal expense because it doesn’t think that it was a legitimate business expense.
Payment Processing and Management Fees
As a content creator, it may be useful for you to use a variety of payment services, account management services, and even bill payment services. The fees that you pay for these services can be written off. By deducting them from your income, you decrease your taxable income, and, consequently, your tax burden.
To be specific, the fees included in this deduction are credit card processing fees, bank wire/transfer fees, and any fees paid for special account services that help you manage your incoming and outgoing cash. Now, if you are accepting payments in foreign currencies, you should talk to a tax adviser about whether you can deduct currency exchange-related fees from your income.
Receipts and Records
As a self-employed OnlyFans content creator, you are responsible for paying your taxes and getting as many legitimate tax write-offs as possible. In order to give your bookkeeper, accountant, tax adviser, or CPA the best chance of decreasing your tax burden, you must provide them with your business records, receipts, and notes. This information must be consistently, diligently done on a regular basis – generally when the day or week the cost is incurred.
As a business owner, operator, and content creator, you have so many things to do that it is unrealistic to think that you are going to remember all your business transactions. If you are trying to maximize your deductions or defend yourself during an IRS audit, then you want as many receipts and business notes explaining your thigh process and decisions as possible. Plus, well-documented expenses carry more weight and are considered more reliable than verbal explanations of small expenses based on your memory of things that occurred one to seven years earlier. Also, if you have to go to tax court to defend yourself, the judge wants to see documentation, and your lawyers want documentation to support their legal arguments.
In short, support your claims for tax write-offs with lots of documentation. Think of it this way, the pain of maintaining your business expense documentation is far less than the pain of paying owed taxes, penalties for not properly paying your taxes, and the interest that will accrue until you pay off your tax debt. In the extreme, you could be sitting in jail thinking about how much easier it would have been to document everything or to have not taken the deduction.
Wrap Up . . .
The top 10 OnlyFans tax write-offs for content creators can help you significantly reduce your tax burden. Moreover, by documenting your business expenses on a daily to weekly basis, you may realize that your business expenses are greater than you thought and that you have more business expenses than you thought because now you’re recording all your business expenses.
If you don’t have the time, interest, or discipline to do what needs to be done to justify your write-offs or identify them, then you should hire someone else to do it. Note, the money you spend on these professional services can also be written-off.
When looking for tax and accounting professional services, work with skilled and experienced professionals who understand specialized online content creators. Free Cash Flow Agency has tax and accounting professionals who can answer your questions, do your accounting, and file your taxes.