YouTube channel as a business

[Smallworldx4]

My daughter has a YouTube channel that started as a hobby but has gained a little traction and the goal would be to reach the number of views needed to be able to monetize. Essentially we are looking at it like a business. Even though it is not monetized and she currently is not receiving income, can we deduct expenses for this business on Schedule C? 

[Vanessa A]

No.  In order to deduct expenses, you would actually need to be open for business and not still a hobby.  For YouTube open for business would mean when you get to the point where you can monetize it, then you would be able to claim these expenses as start up expenses.  

To be considered a business, you must earn money in 3 out of 5 years.  So, if you started trying to claim it as a business instead of a hobby at this point, you may get push back.

Also, if it is your daughters business, she would be the one to claim the expenses.  You cannot claim your daughters business income or expenses on your own return. 

[Smallworldx4]

So just to clarify, my daughter is a minor so the channel is actually in my account and I supervise all that she is doing before we upload the content to the channel. So technically I would consider it my business and she is somewhat an “employee” since she’s creating the content, however since she’s a minor she cannot do this without my supervision or approval. Also since you only have to be profitable 3 out of 5 years, why wouldn’t the last year be considered a business since we are working towards monetizing by building an audience and uploading content regularly?

[AmyC]

No but when it is a working business, you can claim these start up costs. Let's look at this a different way. Think of starting a restaurant. You have to find the building,  buy food, advertise for customers, etc but all expenses before the $1 are start up costs.  Once the first customer buys something, it is a business.

Keep track of your start up costs. They will all be added together once you have a business making money and you can deduct start up costs.

IRS website: Small business