How Do Influencers Handle Taxes? A Guide
The creator economy has exploded over the past few years. Millions of people now earn money through Instagram posts, YouTube videos, TikTok content, and brand partnerships. But how do influencers handle taxes when their income comes from dozens of different sources throughout the year?
Many creators find themselves scrambling come tax season. I mean, do you really have to pay taxes on that free skincare routine a brand sent you? What about the $500 you made from affiliate links last month? There are many questions, and not that many answers since the creator economy is still relatively new.
However, you should know that the IRS treats influencer income seriously, and getting it wrong can lead to penalties and interest charges.
Here's what counts as income and when to make your tax payments throughout the year as an influencer or content creator.
Do Influencers Pay Taxes?
Yes, influencers pay taxes on their earnings.
If you make money as a content creator, the IRS considers you self-employed, which means you're running a business whether you think of it that way or not.
This applies to all forms of influencer income: sponsored posts, affiliate commissions, brand partnerships, merchandise sales, course sales, speaking fees, and even "free" products you receive from companies. The bottom line is, you make taxable income.
How Do Influencers Do Their Taxes?
When you're a regular employee, your employer handles most of the tax work for you. They withhold income taxes, Social Security, and Medicare from your paycheck and send you a simple W-2 form at year-end.
But as a self-employed individual, you're responsible for keeping track and filing taxes.
You'll usually use Schedule C (Profit or Loss from Business) to report your influencer income and business expenses. Most influencers also need to file Schedule SE (Self-Employment Tax) to calculate the additional taxes they owe on their business income.
Employees split Social Security and Medicare taxes with their employer, but self-employed people pay both portions themselves.
Making Quarterly Estimated Payments
Since nobody is taking taxes out of your influencer payments automatically, you're responsible for paying the IRS throughout the year. This happens through quarterly estimated tax payments.
Quarterly payments are due on:
January 15
April 15
June 15
September 15
You need to estimate how much you'll owe in taxes for the entire year, then divide that by four and send a payment each quarter. Missing these payments can lead to penalties.
The easiest way to calculate your quarterly payments is to take 25-30% of your net influencer income each quarter and send that to the IRS. This covers both income tax and self-employment tax for most creators, but check with your tax advisor about your particular situation.
Self-Employment Tax
This 15.3% tax covers your Social Security and Medicare contributions, and it's in addition to your regular income tax.
When you work for an employer, you pay 7.65% and your employer pays the other 7.65%.
As a self-employed influencer, you pay the full 15.3% yourself. On a $50,000 influencer income, that's $7,650 in self-employment tax.
That said, you can often deduct half of your self-employment tax when calculating your adjusted gross income. This reduces your overall tax burden. You also only pay self-employment tax on your net earnings after business expenses, so proper deductions help reduce this tax, too.
Brand Partnerships
Brand partnerships can create some of the most complicated tax situations for influencers because they can involve both cash payments and free products.
When you receive cash for sponsored posts, that money is straightforward taxable income. Free products are trickier.
The IRS considers these "bartering income" based on the fair market value of what you received. If a brand sends you a $200 jacket in exchange for an Instagram post, you owe taxes on $200 of income even though you never saw any cash.
You should receive a 1099-NEC form from any brand that paid you $600 or more during the year. However, you still owe taxes on payments under $600. The 1099 is just for reporting purposes.
Do Influencers Pay Taxes on Gifts?
Yes, influencers typically pay taxes on "gifts" they receive from brands, because most of these aren't actually gifts in the legal sense.
The IRS has a pretty strict definition of what counts as a true gift, and most influencer freebies don't qualify.
A perfect example of this happened with events like the VMAs and Met Gala, where celebrities received luxury swag bags worth tens of thousands of dollars. Companies tried to write these off as business gifts, but the IRS shut that down for several reasons.
First, business gift deductions are capped at just $25 per person per year. A $50,000 swag bag clearly exceeds that limit by a lot.
Second, these bags weren't given out of generosity. They were given in exchange for publicity and social media exposure. When there are strings attached like expected posts or appearances, it's not a true gift.
In this example, celebrities have to report these swag bags as taxable income. If the value is over $600, they even receive 1099 forms for them. Meanwhile, companies can deduct the full cost as a marketing expense rather than being limited to the $25 gift deduction.
Essentially, if you're receiving products with the expectation that you'll post about them, mention the brand, or provide any kind of exposure in return, the IRS considers this a business transaction, not a gift.
Usually, you owe taxes on the fair market value of whatever you received.
What Do Influencers Get to Write Off?
As a self-employed influencer, you can deduct legitimate business expenses that help you create content and run your business. These deductions reduce your taxable income, which means you pay less in both income tax and self-employment tax.
Common tax deductions for influencers include:
Equipment and Technology: Your camera, lighting equipment, microphones, editing software, phone (if used for business), laptop, and any other tools you use to create content are all deductible business expenses.
Home Office: If you have a dedicated space in your home that you use exclusively for creating content or running your influencer business, you can deduct a portion of your rent, utilities, mortgage interest, and home maintenance costs.
Professional Services: Payments to editors, graphic designers, virtual assistants, accountants, lawyers, business coaches, and other independent contractors are all deductible when they're related to your influencer business.
Marketing: Costs for running ads on social media platforms, website hosting, email marketing software, and other promotional expenses are deductible for tax purposes.
Travel Expenses: If you travel for brand partnerships, content creation, or business conferences, you can deduct transportation, lodging, and meals.
There are several other deductions that social media influencers can potentially qualify for. However, these expenses must be ordinary and necessary for your influencer business. If you're not sure, consider working with a tax professional.
FAQs
Do You Have to Pay Taxes on Money Made From Instagram?
Yes, you have to pay taxes on all money you make from Instagram, whether it comes from sponsored posts, affiliate links, Instagram Reels bonuses, or any other monetization feature. The platform where you earn the money doesn't matter to the IRS. If you're making income from your content creation activities, it's taxable business income.
Do Influencers Receive a 1099?
Influencers typically receive 1099-NEC forms from companies that paid them $600 or more during the tax year. However, you'll only get these forms from businesses that have your correct tax ID or Social Security number on file, which is why it's important to fill out W-9 forms when brands request them.
Many influencers don't receive 1099s for all their income. Especially payments under $600, cash payments, or payments from companies that don't have proper tax information. But you still owe taxes on this income even without a 1099 form. The 1099 is just a reporting tool. It doesn't determine whether the income is taxable.
Do Influencers Have to Declare Gifts?
Influencers have to declare most "gifts" they receive from brands because these typically aren't true gifts in the tax sense. If you received products, services, or experiences in exchange for posting content, mentioning a brand, or providing any kind of exposure, the IRS considers this taxable income based on the fair market value of what you received.
The only items you wouldn't need to declare are genuine gifts given with absolutely no expectation of promotion or business benefit, and these are rare in influencer relationships.
Are Brand Ambassadors Considered Employees?
Most brand ambassadors are considered independent contractors, not employees, which means they're responsible for handling their own taxes. Typical brand ambassador arrangements, where you create content on your own schedule, use your own equipment, and maintain relationships with multiple brands usually fall under the contractor status.
However, if a brand exerts significant control over your work schedule, provides equipment, or requires exclusive representation, you might be classified as an employee and receive a W-2 instead of a 1099.
Stay Tax Compliant as an Influencer or Content Creator
Managing taxes as an influencer can be confusing. But it's essential to remember that every dollar you earn from your content is likely income you have to pay the federal income tax on, and sometimes self-employment taxes, too.
If you're not sure about what tax forms to use or how to fulfill your tax obligations effectively, Desi Tax Service® can help you find clarity in tax season and start saving money you didn't know you had.
Learn more about our services!
