If I have a monetized youtube channel but do not make the minimum $400 a year which requires me to report to the IRS, can I still report my earnings and write off products I use in my videos?

Forum|Forum|5 years ago
February 26, 2021
12 replies
92 views

My channel is a photography-based channel where I would use various products in my videos to shoot and make prints to show my subscribers the in and outs of the processes I use. I don't make a lot of money from the channel but I'm treating it as a business with the intention of making a viable source of income. My problem is that it currently is not a sustainable business but a business nonetheless.

Is the minimum 400$ income requirement necessary to claim deductions on supplies and other expenses? Or am I able to claim these deductions regardless of income amount? And if I am able to claim these deductions, am I still able to sell the prints that I make using the material?

Not A Product Question

Opus 17

Level 15

Expert Reviewed

Yes, you can report a self-employment business even if your profit is less than $400. ($400 is the level at which you are required to file tax return if you have no other income. If you file a return for any reason, you must report all your income.)

You report your gross revenue and deduct your expenses. It's ok to show a loss as long as you are running the business like a business with a motive to eventually make a profit. However, if you show too many losses over too many years, the IRS may eventually decide it is a hobby, not a business, and deny your deductions for expenses. But that's not an issue you have to worry about the first couple of years.

fujipro400Author

Level 2

Thank you! This brings up another question though. If I'm not making less than $400 from the business, is it worth the time to report and seek out these deductions given that my taxable income is almost irrelevant? Should I just wait until my channel grows before seeking these deductions out?

fujipro400Author

Level 2

sorry there was a typo, I meant if I am making less than $400*

AmeliesUncle

Level 15

You said it is a business, but you may want to review the "Nine Factors" for hobby vs business rules just to confirm that it is a business: [removed]

Assuming it is a business, you must claim all allowable deductions. As Opus mentioned, if those deductions create a loss, that loss will offset other income on your tax return (you are almost certainly "At-Risk", which allows the losses to be used in the current year).

fujipro400Author

Level 2

Hi! Thank you for your reply. The link you sent is broken, but I'm wondering if you could send another. Also, the ad-revenue my videos next to nothing, in fact when I factor in the materials for making images I'm actually losing money. I enjoy making the videos though and because I technically make revenue I wondered about the financial benefits of filing it as a business. As I said in my earlier post, my intention is to eventually make it profitable so I don't think I'd be doing anything illegal, but alas I'm here to get a better understanding. Would those losses reduce the amount of money I get back on my return?

Opus 17

Level 15

@fujipro400 wrote:

Hi! Thank you for your reply. The link you sent is broken, but I'm wondering if you could send another. Also, the ad-revenue my videos next to nothing, in fact when I factor in the materials for making images I'm actually losing money. I enjoy making the videos though and because I technically make revenue I wondered about the financial benefits of filing it as a business. As I said in my earlier post, my intention is to eventually make it profitable so I don't think I'd be doing anything illegal, but alas I'm here to get a better understanding. Would those losses reduce the amount of money I get back on my return?

I feel like there is some understanding missing here.

Suppose you have $50,000 of taxable wages. You add a business with $5000 of losses. Those two combine so that you only have $45,000 of taxable income to pay taxes on. Your business losses reduce the tax you owe on your other income.

If you are operating the business in a businesslike manner with a true profit motive, you can deduct your losses against your other regular income. Whenever you finally turn a profit, you start paying income tax on the profit.

Claiming a business loss would not reduce your tax refund, it would reduce the tax you owe and probably increase your refund.

honeybear

Level 2

I have a question, what is the " Business code" for Youtube review video earnings?

DawnC

Level 15

519130 - Internet Publishing and Broadcasting and Web Search Portals

That search for other NAICS or SIC codes, search here.

@honeybear

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AmeliesUncle

Level 15

@DawnC wrote:
519130 - Internet Publishing and Broadcasting and Web Search Portals

That search for other NAICS or SIC codes, search here.

The tax return does not use NAICS codes, it uses "Principal Business Activity Codes" (which are based on NAICS, but are usually more broadly categorized).