Martial Development

Martial arts for personal development

The IRS Paid Me $500 to Create This Blog

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14 Comments

Reader Alex Shalman from Practical Personal Development recently asked me to explain why I blog.  I answered this question a few months ago in Give Thanks To Your Blogging Inspirations.  So, instead of repeating myself here, I’ll revisit one particular benefit of blogging.

I’m talking about cash money.  Believe it or not, Uncle Sam paid me to write this blog.  And he might be willing to pay you too.

Business license

Licensed to Blog

Blogging is not my hobby; it’s my business.  I’ve got a license to prove it.  And all the bills associated with my blogging are therefore business expenses:

  • Web hosting: $3.95/month from Westhost
  • Internet access: $30/month DSL
  • Other expenses: Computer hardware and software, office supplies, books, training, etc.

Those expenses alone exceed $500, and as a professional blogger, I can deduct them from my business income.  In fact, due to my business structure, I should be able to deduct these expenses from my other income source (i.e. my day job).

Every time I subtract a dollar from my taxable income, I can subtract approximately 25 cents from my tax bill.  So, assuming I could deduct $500 spent on my blogging business, I would realize a tax savings of $125.

But actually, I spent much more than that.  The martial arts seminars and conferences I attended can also be considered “ordinary and necessary” expenses, and are therefore deductible according to IRS Publications 535 and 463.

When I add in the costs of transportation, lodging, and seminar fees, my total blogging-related expenses exceed $2000.  Subtracted from income, this should result in a tax savings of at least $500!

Can You Start a Blogging Business?

For federal tax purposes, a blogging business is simply a blogger licensed to conduct business, operating with a profit motive*.  Note that it is not necessary to actually turn a profit, in order to be considered a legitimate business by the IRS.

You do, however, need to operate in a business-like manner; that includes making honest attempts at profitability.  AdSense and other contextual advertising programs are a good place to start.

Do you have any blogging tax tips to share?

* This is my understanding, but I recommend you double-check with a tax professional, or at least some professional tax software.

[tags]blogging, business blogging, professional blogging, taxes, adsense[/tags]

Categories: Blogging

14 responses so far ↓

  • 1 Alex Shalman // Feb 24, 2007

    What is the process of obtaining this blogging license?

  • 2 Chris // Feb 24, 2007

    It’s just a regular business license. Requirements vary from state to state. The U.S. Small Business Administration is a good place to start.

  • 3 Ron H // Feb 25, 2007

    Hi there,

    Interesting article, one word of caution is that within three years time your business has to turn profit and not simply collecting return on your business’s federal tax or the IRS will get on you.

    Had a friend that was renting a condo but with expenses, etc. he was getting a return every year on his tax’s eventually the IRS contacted him informing him that the IRS looks upon this as creating a business front that is not profit motivated and is simply a front to collect return on federal tax’s.

    If you do turn profit that everything is legit and the blogging makes for a nice cut out of your Federal tax’s.

    Great site by the way!

  • 4 Mark Tomin // Feb 27, 2007

    Interesting article, it seems that he still has three years, that’s $1500 of return. Then his blog can file bankruptcy?

     

  • 5 Chris // Feb 27, 2007

    I enjoy operating this website, but if it is still losing money after 3 years, then I will shut it down.

  • 6 Jeremy Stein // Apr 2, 2007

    You use your computer and internet connection only for blogging? If not, you’re lying on your tax forms and stealing from the government.

  • 7 Chris // Apr 2, 2007

    If you had filed a business tax return before, you would know that many expenses (including computers and home offices) are deducted on a percentage basis; it isn’t all or nothing. Perhaps you should consult a tax advisor before making any more hyperbolic accusations.

  • 8 J // Dec 2, 2007

    Hi, I’m thinking of setting up a similar blog to help write-off some of my expenses that are more yoga-related vs. martial arts related.

    Since I’m not expecting to be profitable in the near term (if ever) do you have any suggestions/experienses on sole proprietorships vs. LLC or being a corporation?

    Also do you suggest opening a business account immediately? It seems a little like overkill for something that probably won’t generate much money.

    thanks,
    j

  • 9 Chris // Dec 2, 2007

    I would undertake the simplest possible setup unless you have reason to do otherwise.

    If you never expect to be profitable, that may impact the IRS assessment of whether your activity constitutes a business or a hobby. See the links above.

  • 10 poundwise // Jan 13, 2008

    You cannot deduct your computer, DSL, office supplies, etc. in full unless you use them exclusively for your Blogging enterprise. If you continue to do so, you will be in for a shock in the event of an audit.

  • 11 poundwise // Jan 13, 2008

    Note: I just saw, in an earlier post, that you may perform your deductions on a percentage basis. However, this still poses many problems. If you do not keep records of personal use v. business use, etc. then it will be disallowed.

  • 12 joe // Jan 26, 2008

    blogging is a great way to make money these days i hear. high speed internet you need of course. http://t1buyersguide.com

  • wujimon » Blog Archive » Monetizing Blogs // Feb 28, 2007

    [...] There’s been a little buzz around the taijiquan blogosphere about monetization of blogs. Martial Development outlines how the IRS paid him $500 to create the blog and Formosa Neijia outlines some changes to his blog that include advertisement.   [...]

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