Top 7 Tax Deductions for OnlyFans Creators
OnlyFans are specialized content creators who are treated as self-employed business people by the U.S. Internal Revenue Service (IRS). As a self-employed business person, you must pay all your taxes. You are responsible for all the taxes on your net income from your OnlyFans account(s). This is necessary because the OnlyFans platform does not pay the IRS taxes on your behalf.
Note, the IRS taxes referred to here, are the ones you must pay if you are running a business. So, if you are using your OnlyFans account to make money, create a brand, as a side hustle, or for some other business related reason, it’s a business. However, if you are using OnlyFans as a form of self-expression, for fun, or on occasion, your activity would not be considered a business. Instead, it would be classified as a hobby. Hobbies are not treated like businesses. So, make sure that you correctly classify your OnlyFans activity on your tax return.
The tax rate for self-employed people is 15.3%. This tax rate is applied to income received from your OnlyFans account(s) that is US$400 or more. The good news is this tax rate is applied to your net income, not your gross income. Net income is the amount of money you have left after you subtract your expenses from your income. For example, if you earned US$20,000 from working as a content creator, but spent US22,000 to earn the US$20,000, then you don’t owe the IRS any taxes. You don’t owe any taxes because after you subtract your income from your expenses, you are US$2,000 in debt. The IRS doesn’t tax this kind of debt.
Tax Deductible Expenses
Your goal is to reduce your gross income as much as possible so that you pay the minimum amount of taxes possible. To do this, you must deduct your business expenses from the income generated by your business. Now, before you go crazy making up expenses and exaggerating the legitimate ones, you must first understand that you are only allowed to deduct certain kinds of expenses. You may deduct ordinary and necessary expenses. The IRS has defined both types of expenses in the tax code.
Ordinary expenses are the general expenses that must be paid to operate your business. These expenses are expected since they are common to most people who operate a business similar to yours. The kinds of expenses that meet this definition are rent, utilities, parking fees, legal fees, and transportation fees.
Necessary expenses assist you in running your business. Although you are not required to incur these costs, the services or goods obtained from them make it easier to run your business and may make your business more productive and profitable. These kinds of expenses can include fees paid for software and apps, advertising and marketing costs, payment processing fees (e.g., fees charged to you for processing your client’s credit card transactions), and professional services (e.g., video editing, home business office repairs, photo shoots).
Top 7 Tax Deductions for OnlyFans Content Creators
The top 7 tax deductions for OnlyFans creators are considered ordinary expenses. The seven expenses are:
- Business Use of Home Office
- Internet and Phone Fees
- Professional Fees
- Software and App Fees
- Advertising and Marketing Fees
- Staging supplies(e.g., costumes, props, decorations)
- OnlyFans Platform Fees
Let’s look at each type of deduction more closely.
If you would like to read the Ultimate Guide to taxes for Onlyfans, click here to read now.
Business Use of Home Office
If you operate your business from your home and have committed a specific room, part of a room, or section of your home to the business, you can deduct the expenses associated with the space used for your OnlyFans business. Moreover, if you edit or upload your OnlyFans videos in your home, you can deduct expenses associated with those activities too.
The kinds of expenses that can be deducted include rent, lease, mortgage, mortgage interest, property insurance, utilities, repairs, maintenance. If the property is only used for your business, you can deduct 100% of it. However, if use of the property is split between your personal and business use, then you may only deduct a percentage of the costs related to space used for your business.
Other deductible expenses include office supplies (e.g., pens, staples, post-it notes) and electronic equipment (e.g., cameras, computers, printers) that you need for your business. You may be able to deduct the full cost of these items or their depreciation costs over time.
Internet and Phone Fees (Landline and Mobile Fees)
You need Internet service and phone service to run your OnlyFans business. These services can be deducted in part or whole depending on how you use them. Deductible Internet-related fees include any special modems, connections, or services that you use to improve and maintain your Internet speed, reliability, and privacy. As for your landline and cell phone(s), if they are used to promote, market, or operate your business, expenses associated with them can be completely or partially deducted from your gross income.
Fees paid for business-related professional services are 100% deductible. Acceptable professional services include accounting, bookkeeping, legal, consulting, video editing, image editing, and photography. These fees are incurred because you are operating a business and working to make it productive and profitable, so they are allowable. However, you may have some difficulty successfully arguing that a professional massage at home and bottle service at the hottest restaurant in town are tax-deductible professional services.
Software and App Fees
Money spent on software, apps, and subscriptions that are used to support your OnlyFans business are tax deductible. For example, money spent on cloud storage, Canva, antivirus software, encryption software, licenses for digital images, licensed music fees, and even your YouTube channel fees qualify as a deduction.
Do you operate a website that promotes or markets your OnlyFans activities? Website-related fees can be deducted too. Expenses that you can include in your deductions are website hosting, domain name registration, plugin costs, and ancillary website service fees.
Advertising and Marketing Fees
It costs money to get public recognition of your name, business, and talents. The cost of developing your brand and clientele can be deducted as advertising and marketing expenses. These expenses include digital ads on Google, Facebook, YouTube, and Instagram. Moreover, if you hire people to create, manage, assess, and optimize your marketing campaigns, those fees are deductible too. Another set of deductible expenses are the costs of attending events, seminars, and other promotional activities (charitable donations, volunteering). The costs associated with activities that promote or market your business can be deducted from your gross income.
Staging Supplies (e.g., costumes, props, decorations)
Most OnlyFans content creators make over 80% of their income from 20% of their customers who request exclusive or niche services. These specialized services generally require the content creator to purchase special clothing (e.g., lingerie, dresses, underwear), props, decorations, furniture, wigs, makeup, and lighting equipment. The items that are only used for clients special requests are 100% deductible as long as you never use them outside your business. Also, you are advised to keep copies of all client requests that require you to purchase special supplies and keep the receipts too.
OnlyFans Platform Fees
To operate your OnlyFans business, you must pay the platform fees to access its services and make your content available to people visiting the platform. The fees paid to the platform can be deducted from your gross income. In addition, the money that OnlyFans deducts from your revenue can be claimed as an expense too.
Record Keeping and Documentation
You are encouraged to document all your expenses and keep receipts (just in case you are audited by the IRS). Also, whether you are able to deduct the full cost of the fees or part of the cost depends on how the costs are incurred and whether you personally benefit from the expenditures. Moreover, for partial deductions you must show how you decided how much to deduct for your business (i.e., can’t just make up random percentages).
If you are getting a little worried or stressed, it’s understandable. These matters are generally not the focus of specialized content creators. Instead of stressing out or risking an IRS audit, contact an experienced accountant, tax advisor, or CPA who focuses on working with content creators. Their goal is to legally reduce their tax burden, and keep as much of your hard-earned income, as possible, in your pocket.
Free Cash Flow provides professional tax and accounting services to a variety of specialized content creators. It’s a company that respects you, your business, your hustle, and that wants to work with you. If you have questions, need help, or think that you may need help, contact Free Cash Flow for a consultation.