Blogging and Taxes with the New Tax Bill

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Bloggers often miss many opportunities when organizing their taxes. Writing on a regular schedule occupies a large part of the creative artist’s time. Taxes frequently become an afterthought.

Over the last two year several bloggers have approached me to review their tax situation. Some ended up as clients; other I only consulted.

A pattern has emerged. There are certain elements bloggers tend to forget. Non-cash deductions are almost always missed. Bloggers also frequently use the wrong entity structure to maximize benefits.

The Tax Cut and Jobs Act signed into law late last year has added numerous new elements to consider when planning your taxes. Bloggers need to consider these additional options or risk overpaying their taxes.

This is a good time as we head into tax season to review the tax rules affecting bloggers. We will cover the more common issues and expand into finding the best vehicle (entity) to use for your blog with a discussion on how the new tax rules affect your decision-making process as you operate your blog.


Taxable income comes from several directions when running a blog. Google and similar advertising platforms provide a steady stream of income.

Amazon is a nice side niche getting worse every day as they reduce the fees paid on virtually every category.

Some bloggers have a specific advertiser lock in a location on their blog. All this income is reportable and subject to tax.

Serious money is earned from books and programs. Most bloggers understand these need to be reported on their return.

Other affiliate programs can turn a nice blog side gig into serious money. Good recordkeeping should assure you don’t miss any reportable income saving you angst should an audit letter arrive.

Before we leave income I want to point out one income source I bet everyone in the blogosphere is missing: awards swag. As a recent winner of the Plutus Awards for Best New Personal Finance Blog of 2017, I received some swag. There was some pretty cool stuff in there. The IRS also makes it very clear this is reportable income. It’s not my job to police you. My job is to inform. (Yeah, I know. Party pooper!)


Bloggers have more business expenses than they realize. Even blogger clients think they have virtually no expenses! I have my hands full educating them. I also stalk my blogger clients as they tend to write what they are doing in their blogging business which gives me a good idea of what expenses will show up in their financials. When the financials lack the expected deductions I inform my client of my stalking tendencies and chisel the deductions out of them. Sometimes their blog post IS the deduction substantiation!

Bloggers who have a designated area in the home used on a regular and exclusive basis for their blog have several deductions coming their way. A proration of all home expenses are allowed as a deduction, plus all expenses directly related to the work space (repairs and maintenance, for example). Depreciation is also allowed.

If recordkeeping for a small office in the home is too much work you can always use the safe harbor of $5 per square foot of office space. The maximum home office deduction allowed with the safe harbor is $1,500 per year. Property taxes and mortgage interest are then fully reportable on Schedule A should you itemize.

There is a small issue between actual expense and the safe harbor of the home office. Sometimes the blog might not be profitable or only has a small profit. The home office deduction cannot cause a loss on Schedule C (for sole proprietors). Unused home office deductions are carried to the next year when actual expenses are used whereas the safe harbor deductions are permanently lost if you are unable to use them currently.

Office supplies, promotional expenses, postage and blog maintenance fees are all deductible. Most out-of-pocket blog related expenses are written off in the year paid (assuming most bloggers are cash basis taxpayers).

Travel is common in the industry. I find most bloggers are unsure of what travel they can deduct so they don’t take any deductions at all except for conferences they attend. More is deductible than you might expect.

If you always wanted to see Australia or retired and travel the world while writing a blog to fill time the expense is NOT deductible! A pure pleasure trip down under is not business related. But there might be several opportunities to deduct some expenses.

A blogger in this genre wanted to know if he could deduct some travel expenses where personal was intermixed. He was in the Philippines and was invited by another blogger to visit him is Taiwan (I think). He made the trip so he could discuss some business plans for his blog. I argue the air flight and all related expenses to travel from the Philippines to Taiwan are deductible, including, hotel and the meals and incidentals per diem (more on the per diem later). If he flew back to the Philippines or home I would argue this is deductible. If he flew on to a personal destination the last leg of travel might not be allowed. However, as long as the business portion of the travel is still in effect it should be an allowed deduction.

There are several non-cash deductions related to travel. Business miles are deductible. You can also deduct a per diem for meals and incidentals (M&IE) for each day on the road (technically, every overnight outside the metropolitan area of your residence). Lodging expenses also have a per diem for employees, but not owners or employee-owners; owners must use actual lodging expenses.

There are two ways to calculate your M&IE deduction: the high-low method or based on the rate for each city you conducted business in (involving overnight travel) and actual expense. The high-low method is easier. You get a flat M&IE rate of $57 for most areas within the continental U.S. (CONUS) and $68 for a few high cost areas.

DOT workers have a special rate of $63 within CONUS and $68 outside CONUS (OCONUS).

There are rates for OCUNUS as well for non-DOT workers.

You are allowed to switch methods during the year, BUT you must use the same method within a single business trip.

Meals and incidental expenses are 50% deductible for businesses; 80% for DOT workers (ie. truckers).

There is a modest amount of recordkeeping involved, but worth the effort. The per diems add up fast.

If your spouse travels with you and performs business related activities they may also qualify for a deduction of their travel expenses, including the M&IE per diem.

Business or Hobby

This question has taken on more meaning in 2018. For 2017 hobby expenses are still reported on Schedule A, subject to 2% (the first 2% of AGI of deductions in this category (safe deposit box, tax preparations fees, hobby expenses et cetera) reduce the actual deduction). In 2018 the “subject to 2%” part of Schedule A disappears. This means hobby expenses are never deductible in 2018 and after until they either change the Tax Code or the current provisions expire at the end of 2025.

I think most bloggers are a business even if they think they aren’t. Not making a profit doesn’t mean you are a hobby! If you have a profit motive and conduct your affairs in such a manner you are almost certainly a business.

If you make a profit more than 2 out of a five year period the IRS automatically assumes you are a business and not a hobby.

Business Structure and Entities

When you hang a shingle saying you are in business you are in business. You default to a sole proprietorship or partnership if there are two or more owners.

It’s a good idea to get some legal liability protection with an entity. Organizing as an LLC is the most common way to conduct business. You can also organize as a corporation and elect to be treated as an S corporation.

To kill the pain of tax planning.

LLCs have a huge advantage; they can take on the flavor of any tax treatment available. An LLC can be a disregarded entity and reports their taxes as a sole proprietor (Schedule A of the individual tax return) or a partnership if there are two or more owners.

Organizing your business as an LLC means you can elect to be treated as a corporation and therefore, can elect to be treated as an S corporation (a pass-through entity).

The biggest advantage an LLC has is the ability to change flavors (how they are taxed) without reorganizing the entity. You can start as a disregard entity taxed as a sole proprietor and later elect to be treated as an S corporation. The first election can be made at any time without question by the IRS. Any subsequent change must be after five or more years since the last election changing how the entity is taxed. Example: An LLC is treated as a disregarded entity starting in 2015. The business grew so the owner elected to be treated as an S corporation in 2017. Since the first election is automatic at any time the election is allowed. The LLC cannot again change how it is taxed until tax year 2023, the five-year required waiting period.

Which Entity is Best

The sole proprietorship (or disregarded entity) is the easiest to account for. The business income and expenses all are reported on the personal tax return on Schedule C. The one drawback of the sole proprietorship is the self-employment tax.

Most clients don’t make a lot of noise when I show them their income tax, but they squeal like a stuck pig when I show them the SE tax added on top. The SE tax is 15.3% on top of income taxes. There are some limits to the SE tax we will not cover here.

Once you have any significant blog income you will want to be an S corporation or LLC treated as such. As your income rises the taxes assessed a sole proprietor become increasingly painful.

S corporations (we will discuss regular corporations (C corps) in the next section on recent tax changes) are pass-through entities. Profits flow to the personal tax return. These profits are assessed income tax only, no SE tax.

S corporations are required to pay owners reasonable compensation. This is a wide road to travel and offers plenty of opportunities with serious pitfalls for the overaggressive. The owner’s wages are subject to FICA taxes (the twin sister of SE taxes). The remaining profits are taxed for income only.

Decision Tree Using Recent Tax Law Changes

For decades the entity decision was fairly straight forward. Once profits hit $30,000 – $50,000 it was time to think about an S corporation. Some businesses require higher profits before considering an S corporation, but anything under $30,000 is hard to justify considering the additional payroll accounting costs for owners and additional tax return preparation fees for the S corporation tax return.

The Tax Cut and Jobs Act changed all that. Regular corporations are now a consideration. Tax rates have dropped significantly for C corporations, except for those with profits less than $50,000.

C corporations always had one serious flaw small businesses couldn’t overlook: the double taxation of dividends. Now that the corporate tax rate is a flat 21% and all other business owners face a tax rate as high as 29.6% after considering the new 20% business income deduction, regular corporations are back in play.

For the first time in my career I have to seriously consider the regular corporation as an option. The choices are no longer so simple.

Also, reasonable compensation has more than one purpose. Most business owners want to keep their wage as low as possible to minimize FICA taxes. Now, S corporation owners may need to reconsider a HIGHER wage and FICA taxes to meet the cap on the business income deduction ($315,000 for joint returns and $157,500 for all others). An S corporation with one owner filing jointly on her personal return and $450,000 in profits will not qualify for the business income deduction. If the owner takes reasonable compensation of say $150,000, the S corporation will only have a $300,000 profit and the owner WILL qualify for the deduction if she files a joint return.

(Note: Don’t be confused about the reasonable compensation and guaranteed payments to partners issues. Wages can bring down the income and qualify the owner for the deduction for the cap. Reasonable compensation and guaranteed payments to partners do NOT count when using the formula for business owners above the cap. The formula above the cap is 50% of wages excluding those we mentioned OR 25% of wages excluding those we mentioned, plus 2.5% of the value of qualified property at purchase, generally unadjusted. (Think real estate.))

Time is on Your Side

Sweat is running down your forehead by now, I’m sure. Not to worry.

Review your books and make sure you didn’t miss any deductions for 2017. Things haven’t changed much this year. However, bonus depreciation on assets with a class life of 20 years or less is 100% if placed is service on or after September 27, 2017. For most businesses opting out of bonus depreciation this year is a bad idea. A bigger deduction this year coupled with a bigger profit next year when 20% of profits are a deduction is a powerful planning point.

We have plenty of time to review your situation before deciding which entity structure is right for you. Your favorite accountant will be busy this summer.

My office will review all business clients after tax season to determine if changes are appropriate.

For you, kind bloggers and readers, you are welcome to contact my office to review your situation. Most reviews will be after tax season. We will have time to facilitate any recommended changes to take full advantage of the new tax law. Don’t be surprised if you missed several deductions. Bloggers do that a lot.

I may ask one favor if you do contact my office. I might ask you to give me a plug on your blog because I’m a bit of a traffic whore. All you’ll be asked to say in an Irish accent is:

“Oh, that Wealthy Accountant fella is one swell guy.”

Now that wouldn’t hurt too much, would it?

Personal Capital: You can't manage what you don't know.

Keith Taxguy


  1. Kiana on January 15, 2018 at 7:49 am

    I’ve added this to my bookmarks for later. Thanks for the info!

    • Keith Schroeder on January 15, 2018 at 7:58 am

      I expected a few bloggers might want to bookmark this post, Kiana, for future reference. Remember, one short post doesn’t cover all issues, but it is a great place to start the planning process. Let me know if you need additional clarification on anything.

  2. JOHN MARINO on January 15, 2018 at 7:57 am

    Excellent article…thank you

  3. JD@WealthNotRetirement on January 15, 2018 at 9:22 am

    >>An S corporation with one owner filing jointly on her personal return and $450,000 in profits will not qualify for the business income deduction. If the owner takes reasonable compensation of say $150,000, the S corporation will only have a $300,000 profit and the owner WILL qualify for the deduction if she files a joint return.

    Keith, can you please clarify this just a bit? The two sentences seem to contradict (or I’m reading it wrong). First sentence says it won’t qualify. Second says it will. Numbers appear the same. Maybe it’s the “reasonable compensation” part. Wouldn’t it be foolish not to have reasonable compensation and miss out on the business income deduction? Any chance you would do sample 450K tax return with both scenarios to show the math?


    • Keith Schroeder on January 15, 2018 at 10:26 am

      I knew that sentence would be a problem when I wrote and edited it, JD. I apologize for the ambiguity.

      What I meant to say was if a person owns 100% of an S corp with $450,000 of profit before owner’s wages (and if there are no owner’s wages which would be illegal) and is married and filing a joint tax return, she does not get the business income deduction because her business income is above the cap of $315,000. This assumes there are no other employees either because the formula comes into play if there are other employees (50% of wages or 25% of wages plus 2.5% of qualified assets at purchase price). If the owner takes a wage of $150,000 then the income is under the cap at $300,000 and therefore the business income deduction is allowed.

      In real life it might work like this:

      Same facts as above, but the owner is already taking $100,000 in wages and there is still $450,000 of profits to pass-through. If an additional $150,000 in wages is reasonable to the owner it would benefit the blogger to do so. Since the business income is now $300,000, under the cap, the 20% deduction of $60,000 can be taken.

      The closer to the cap you are the more planning opportunity exists.

      Clearer? If not, let me know.

      • JD@WealthNotRetirement on January 16, 2018 at 9:29 am

        Keith, thanks for attempting to clarify. After reading your reply, I also read the Forbes post. What a f$%^&*+ mess! If the smartest accountants in the room don’t understand this, us mere mortals have no hope. And I really despise the differences between SP, S-Corp, and Partnership give different results. Exactly what I dislike about our tax system overall.

        My yearly income from a niche software business is between the 500K and 1M examples in Forbes. I currently have an LLC taxed as disregarded entity. I do have a solid CPA that handles all my taxes, but I’m trying to learn/understand as much of this as possible. Having to figure out the game of all of this is silly, but if you want to stay ahead, you BETTER play the game (or you lose). It seems playing the game wrong could cost me between 0-150K.

        I enjoy your blog specifically for all the tax discussion you put out. Thanks.

  4. Josh on January 15, 2018 at 10:40 am

    Great article. Quick question. Is a single member LLC taxed as a disregarded entity considered a pass through entity for the 20% pass through deduction purposes? I am trying to figure out of I need to change to S-Corp taxes this year. I will be on the borderline ($30k) income . If the LLC as a disregarded entity does not qualify for the 20% deduction then that would tip the scales.

    • Keith Schroeder on January 15, 2018 at 10:56 am

      Josh, as I understand the business income deduction (and from reading other tax services) a disregarded LLC treated as a sole prop would get the business income deduction. $30k is real borderline and I hate to see people build extra expense when the benefits are minimal.

      I’d wait, Josh, until I flesh out an entire post on this topic in the near future. We have time. My understanding is it will count, but I forget if it was the tax bill or one of the proposals which included an assumed reasonable compensation. The back of my mind keeps saying 70% wage/30% business income qualified for the deduction. I publish facts when I have them. (Even with the split I think electing to an S corp with only $30k in profit is a bit soon.)

  5. Satisfied Ghost on January 15, 2018 at 10:58 am

    Great post. So helpful. I have a blog but also generate income from writing for companies. I also write fiction. So I’ve been a sole proprietor as a “writer” and am writing off all travel and expenses for the writing services, blog, fiction etc. I’m wondering if I should create an LLC or S corp as you mentioned. I’ve always thought the fees and tax prep would make it not worth it for me, but I’m over the 30k to 50k threshold you mention. I’m “FI” but still make this income. I’m also anticipating my husband will move from full time employment to some sort of independent business, and am wondering if we should create a corp or LLC together for both income streams. Or perhaps separate ones if we are worried about the caps. Perhaps I could call your office as you suggest and then link back to you about what I learn? Thanks for all your knowledge and willingness to share.

    • Keith Schroeder on January 15, 2018 at 11:08 am

      Satisfied Ghost, if your writing is producing over $50k in profits per year you really need to consider electing S corp tax status.

      Example: Assume $100k of profit after maximizing all deductions. Also assume $50k is reasonable compensation. The remaining $50k will pass through without SE or FICA taxes, saving you ~$7,500 per year. That’s plenty enough to cover the extra tax prep cost and the payroll service for your wage.

      Separate or combined business activities will not change the $315,000 cap for marrieds; it’s a combined number. The facts and circumstance will determine if it is advisable to combine activities under one LLC or have two.

      Also, something I didn’t cover in the post, your health insurance situation will determine entity choice as well. There are advantages with a regular corp that might play into your personal decision.

  6. Jesseca Organ on January 15, 2018 at 11:59 am

    I am a brand new blogger and have been trying to figure out the tax side of it. I saved your article for future reference!

  7. Cathy on January 15, 2018 at 1:55 pm

    Great article – I assume it’s ok to post this link to a group of bloggers? I don’t blog (yet) but know this will be helpful info for a lot of folks in that group!

    p.s., Philippines… Philippians = biblical (or is that intentional 🙂

    • Keith Schroeder on January 15, 2018 at 1:59 pm

      My eyes were tired last night and the spell checked kept switching it on me. I’ll edit again. Not intentional, just got late last night.

      It could have biblical consequences however!

      Also, no one should ever be shy about pointing out a grammatical or spelling error. My ego isn’t that big. I’d rather fresh eyes point out mistakes so future readers benefit. The worst part is I spelled Philippines wrong every time! I was on a roll.

  8. Becky on January 15, 2018 at 3:03 pm

    Your image at the end – What software/service is that?

    • Keith Schroeder on January 15, 2018 at 3:48 pm

      I just signed up to offer Personal Capital so I’m screwing around with it. I’ll be less subtle once the playing wears off. I promise to remove it and make it a bit less in-your-face soon.

      • Becky on January 15, 2018 at 3:57 pm

        I work in Data Analytics, and I actually liked how it is displaying. I am glad you shared it, and would love to hear your thoughts on it after using it for some time.

  9. John McCarthy on January 15, 2018 at 3:05 pm

    While this is a bit in the weeds for this discussion, when you talk about paying additional reasonable comp to an S Corp shareholder to lower the business income, this won’t help all taxpayers. If they are one of the named services under IRC Section 1202(e)(3)(A) they will be limited to overall taxable income of $157,500 for individuals, and $315,000 for married couples where the QBI deduction will start to phase out. Once in this zone, adding W2 wages for themselves won’t have any overall impact on their household taxable income because W2 wages go up and S Corp passthrough income goes down by the same amount. I would think many bloggers would be covered by 1202(e) due to “any trade or business where the principal asset of such trade or business is the reputation or skill of 1 or more of its employees”.

    • Keith Schroeder on January 15, 2018 at 3:58 pm

      Well, this got serious fast!

      I thought the same thing at first, John. Then I read a Forbes article and started to rethink my position. At first it didn’t click. Eventually the elevator lifted from the ground floor.

      This post covered too much material to give this concept adequate discussion. Check out the Forbes article to see what I meant with examples. If you have questions afterwards come back and we can discuss.

      • John McCarthy on January 15, 2018 at 8:27 pm

        Hi Keith, I read that article when it came out and gave it another read today with (hopefully) fresh eyes. While I like Tony’s solution towards the bottom of the article in that is helps to equalize the treatment between entity types, like he mentions, we don’t have much to go on right now. The courts are unlikely to read much into the intent at this point, and court challenges are years away. We SHOULD really have a technical corrections bill, but with the partisan nature to Congress, it seems unlikely to happen anytime soon. The next step would be guidance from the Treasury. I’m unsure what the timeline for that might look like and how they might choose to interpret the bill Congress has given them.

        From a practical perspective, I have about 10 clients in various stages of S Corp planning. Some are newly formed LLC and some are existing LLCs. I think the safest practical advice I can provide at this point is to have the newly created LLC make the S Corp election with the S Corp return in March 2019 (relying on the IRS’s reasonable cause late elections.) We would have the client defer all potential payroll into the fourth quarter of 2018, if we decide to make the election.

        I simply don’t think we have enough information yet on how this law will be interpreted. For businesses with profit in the area of $150k-$200k, the potential availability of the 20% QBI deduction on 100% of their income (from the literal reading of the law and how it would affect Sole Props) is going to be worth more than the payroll tax savings of the S Corp. While I don’t think this is the intent, nor do I think we will end up here ultimately, I need to provide prudent advice to clients and leave as many options open to them as possible.

        • Keith Schroeder on January 15, 2018 at 8:49 pm

          You are right, John. The courts are sure to mess with several areas of this bill and technical corrections are desperately needed.

  10. Matt Justice on January 15, 2018 at 5:26 pm

    I like these posts! mooooooar…

    There are an absolute TON of ways bloggers can legitimize some of the deductions you mentioned. Particularly in regards to living expenses and travel. Hell, you could even buy a house write off a significant portion of the whole thing. YouTubers are required to travel in order to shoot a specific location. (almost every blogger has a youtube channel… you get the idea) Obviously this depends on how serious you take your blog, as mentioned above a little hobby blog ain’t gonna cut it!

    “Intent to enhance income” is your friend in the beginning years fellow bloggers.

  11. Rachel on January 19, 2018 at 7:25 am

    How serious do you have to be about blogging to start incorporating that as part of your business expenses if that’s not the core of your business? I ask because right now my LLC involves RE investing, the consulting work I do outside of my day job, and I think I paid for the domain name for my blog through it, but the blog is not exactly producing any income now because it’s just me ranting into space with 0 traffic…

    Anywho, you are a swell guy, and I will mention you on my blog in case I get a reader one day 😉

    • Keith Schroeder on January 19, 2018 at 9:52 am

      I’m not sure I like commingling the RE and blog. I wouldn’t have the blog treated as a corp (S or regular) until there were profits of at least $30k. However, I would have an attorney draw up an LLC for legal protection. With an LLC you can flip tax treatment to corp at any time without much effort at all.

      Thanks for stroking my ego. And remember, commenting here is a nice link back to your blog.

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