Maybe you are an affiliate for someone else’s program promoting their stuff to your audience.
Or maybe you have your own affiliate program that you have other people promote your business to their audience.
Both of these will affect your business, but in different ways.
Let’s look at them.
You are the affiliate
When you are the affiliate, you promote someone else’s programs, courses and products. If someone buys the product through the link they clicked on through you, you make a sale.
Therefore, you receive income.
The income is then 100% taxable as revenue for you.
Your promotion methods
As an affiliate, you can promote your affiliate links through both paid and free methods.
The paid methods count as advertising expenses for you.
You also may want to read the fine print in your affiliate agreement to make sure you are following the rules of the affiliate program. Some affiliate programs do not allow you to promote through paid ads.
You have affiliates
You have affiliates that promote your courses, programs and products for you.
First of all, all of the revenue you make from an affiliate sale is counted as revenue.
For example, if your program costs $100, for every sale you make, your revenue is $100. Anything that reduces the amount of money you actually receive is an expense. You must report the whole $100 as income for each sale.
What Your Affiliates Receive
The amount of money that your affiliates receive counts as an expense, usually to the account Affiliate Expenses.
Using the example above, your $100 program, your affiliates receive 50% of the sale. So your affiliates would receive $50 that you would pay based on your affiliate agreement.
Need help with creating your affiliate program? Check out The Course Creator’s Guide to Affiliate Marketing.
The $50 that you pay to your affiliates would go into the account Affiliate Expenses.
Any Other Affiliate Expenses
Any other expenses you incur through your affiliates (i.e. merchant expenses for each sale and your affiliate hosting platform) also count as expenses.
You do not have to separate out these expenses from the rest of your expenses for your business.
How Affiliates Affect Your Taxes
All of the money you make is counted as revenue, no ifs, ands or buts about it, doesn’t matter if you are the affiliate or the affiliate host.
The expenses count as expense deductions, again whether you are the host or the affiliate.
It just matters how you count them. All revenue must count, then deduct the differences from your revenue through the expenses.