As we now live in a social media-driven world, blogging and vlogging (video blogs) activities have been on the rise. These activities have become so profitable that many individuals have been pursuing them on a full-time basis and earning significant income to support their lifestyles.
Since blogging is sometimes treated like a paid hobby that can be pursued along with a traditional job, unlike other professions requiring certain man-hours, many bloggers ignore the fact that income made from blogging is also subject to taxes.
Being a blogger or influencer can be a rewarding career with plenty of perks, but when it comes to taxes, these tastemakers experience the same complexity as self-employed workers: tax filing is a little more complicated than for those who are regularly employed by a company.
Blogging can be treated as self-employment
The Canada Revenue Agency (CRA) considers blogging which results in payment/income as a business activity. Income earned from blogging is therefore treated as self-employment income with the individual as a sole proprietor. If you make money from your blog, you should consult a tax professional and consider filing Form T2125: Statement of Business or Professional Activities to report any income made from blogging activities on your personal tax return.
Since blogging is considered a business, it will incur regular operating expenses for which the taxpayer can claim certain qualifying tax deductions and credits. It is also acceptable that in the initial years the blogging business may not result in a net profit thus allowing bloggers to claim any losses on their tax returns. However, bloggers should be aware that claiming losses every year could make the CRA suspicious and result in an audit. To claim these losses, there needs to be a reasonable expectation that the business will eventually turn a profit.
Do I need to pay taxes in Canada on my blog income?
Yes. If you’re earning any income from your blog, it qualifies as self-employed income under CRA Guidelines. This applies whether you’re operating as a formal business entity (like a sole proprietorship, corporation, or LLC) or just doing informal business and collecting some revenue.
Tax package
The tax package that you will use is T1. This is the package to use if you are reporting income as an individual. T2 is for corporate taxes.
Tax form
The tax form that you have to fill out for your blogging income is the T2125 Statement of Business or Professional Activities.
Note that T2125 is only for your blogging income. You still need to file your T4s for your regular corporate job income, T5 for your investment income, T5008 for your securities transactions (to calculate your taxable capital gains and allowable capital losses), etc. If you have multiple side-hustles, for example, if you are an actress and a blogger at the same time, then you may have to file multiple T2125 forms.
Income includes near-cash & goods!
You should include income that you received through cash and electronic fund transfers (ETFs). However, you must also include items like near cash. The most used example is gift cards. If someone pays you with a gift card, then that is considered income and you need to declare it on your T2125.
Instead of paying cash, many companies have also been paying bloggers goods (e.g., free t-shirts, free cakes, makeup, etc.) in exchange for a blog post, for example. If that’s the case with you, you need to declare the fair market value of the goods in your income as well.
Various tax deductions you may be able to claim as a self-employed Blogger/Vlogger
Blogging is a relatively new profession, but it's covered by the same tax laws that apply to many other occupations. You may be able to take advantage of certain deductions to reduce your tax bill.
Here is a brief overview of the various tax deductions that bloggers can claim for their blogging business. If you are considering monetizing your blog, you should consider getting professional tax advice to avoid any tax issues.
- Domain & Web Hosting Expense: A tax deduction can be claimed for expenses incurred to obtain a domain name. In addition, any expenses incurred for web hosting and the annual fee paid for maintaining the domain name are deductible as these are ordinary and necessary expenses for a blogging website.
- Internet Service Charges: Since an internet connection is necessary to access the website and carry out the blogging activities the monthly service charges are tax-deductible. However, only the portion used for business purposes is deductible. Personal usage should be excluded from the expense deducted. For example, if the internet is used for 12 hours a day to blog, 50% of the day the internet is used for business purposes, and if the daily charge is $10, only $5 can be claimed as a business expense.
- Computer, Mobile Phone, Laptops, Notebooks, and/or Any Hardware and Software Expense: The costs incurred to purchase a laptop, or any computer equipment or software is considered a Capital Cost. Capital costs are deductible for tax purposes based on CRA prescribed percentages each year. These capital items are grouped into Capital Cost Allowance (CCA) classes each of which has a set percentage that ensures that the equipment is deducted over its useful life rather than just in the year of purchase. However, do remember to keep the receipts as they may be necessary to validate the tax claim.
- Home Office Expense: In some cases, bloggers can deduct a portion of their household expenses in the form of a home office expense. If the blogger meets certain criteria, they can deduct a percentage of their expenses such as electricity bills, insurance, mortgage payments, and other home-related expenses related to maintaining a home office. However, as mentioned above for the internet service charges only a certain percentage can be deducted.
- Promotion Expense: Expenses incurred on promoting the blog are deductible. These could include giveaways, Google AdWords expenses, and most other advertising or promotion-related expenses.
- Stationery & Other Office Supplies: Expenses incurred on notebooks, printer ink, highlighters, storyboards, and other stationery items incurred during blogging can be deducted for tax purposes as well.
- Legal and Accounting Fees: Legal expenses could arise if bloggers receive notices from other bloggers regarding copyright, plagiarism, and other such issues, making legal counseling a necessary expense. Also, individuals blogging on a large scale may need to maintain an accountant for proper bookkeeping of income and expenses. Therefore, legal and accounting expenses incurred by a blogger are tax-deductible.
- Travel and/or Conveyance Expense: Companies like Google, Facebook, Instagram, and Twitter often hold conferences and summits which bloggers need to attend to increase their viewers and followers on social media. Most expenses related to traveling such as flights, hotels, and meal expenses that are not reimbursed may be deducted if they qualify and satisfy certain conditions. Consult your tax professional to avoid compliance issues.
- Cell-phone Data and Other Utilities Expense: Blogging and tweeting require bloggers to be in regular touch with their followers. As a result, expenses incurred in relation to data plans provided by cellular networks are sometimes considered tax-deductible expenses.
These are just some of the common blogging-related expenses. It is best to consult your tax professional regarding the taxation of your blogging business activities. As a safe practice, it is good to maintain all receipts, invoices, and bills related to your blogging expenses since you never know when an expense may qualify for a deduction.
Do break down all the expenses
You need to break down all the expenses and categorize them into appropriate buckets (e.g., supplies, business-use-of-home expenses, etc.). Lump-sum expenses could easily trigger an audit from the CRA.
Filing deadlines
The regular filing deadline is April 30th. However, if you are a blogger, you qualify as a sole proprietor. This is true even if you have a regular 9-5 job. As such, your deadline for filing your tax return is June 15th.
Your spouse’s filing deadline is also impacted. Your spouse can file his/her tax return with the same deadline, i.e., June 15th.
Final Words
I hope you find the above tax tips for bloggers useful in helping you navigate your tax season. If you have any questions, please don’t hesitate to contact Filing Taxes either at 416-479-8532 or [email protected]. Schedule an NTR engagement appointment with us and take the first step towards proper management of your finances.
Disclaimer: The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.