One of the most confusing parts of owning a business, is knowing how to do your business bookkeeping and taxes.
Like what is deductible and what isn’t deductible?
And now that you have started your business, you want to make sure that you are doing things right.
Or maybe you've had your blog for a while now, but still aren't sure about what qualifies for tax breaks and expense deductions for your blog.
There is a shortage of accountants and CPAs in the business world who fully understand online business. I regularly get asked about accountants and tax preparers that can help with online business.
But the list that I have is very short because I have had a hard time finding accountants that I can recommend my clients and friends to since there seem to be so few who are taking the time to expand their knowledge base to include the online world.
But as a business owner, you can arm yourself with the proper knowledge before you go to an accountant and then you will be able to help yourself and your accountant when you know exactly what you are talking about.
In this guide, my aim is to make sure that crafters and craft bloggers know what deductions and tax breaks they can take when it comes to their specific business.
So let's dive in.
What is an expense?
First of all, what is an expense?
An expense for your business, whether you are a blogger or not, is something that is ordinary and necessary for the running of your business.
An ordinary expense, according to the IRS, is an expense that is common and accepted in your type of business. What is common for one business trade is not always accepted for another type of business trade.
A necessary expense, according to the IRS, is an expense that is helpful and appropriate for your business trade.
For example, as a blogger, your email service provider (Active Campaign, Convertkit, Mailchimp, Drip, etc.) is both an ordinary and necessary expense for your business. But car expenses are not ordinary and necessary expenses for a blogger.
There is a detailed list of expenses that apply to most businesses. In this post, we are going to dive into the expense deductions that are specific to crafters and craft bloggers.
You can find travel bloggers expenses here.
You can find photographers expenses here.
You can find home decor/DIY sellers and bloggers here.
You can find food bloggers here.
You can find beauty bloggers here.
You can find online coaches here.
You can find the general blogger's expenses here.
You can find the general list of expenses here.
You can find more information on the home office deduction here.
What expense deductions can crafters and craft bloggers take?
Just like with all of the other business types, it really depends on what you are doing with the crafts in your business for how your costs count as expenses.
Let’s break it down further.
Do you write and/or record videos of tutorials for how to make certain craft projects? That is what I see these tutorials as. This is what most of your bloggers do.
They create a new post for each project.
And for the tutorial, you make the project and photograph or video your way through making the project.
For tax deduction purposes, the costs of the supplies you use to make these projects are not tax deductible, unless one of the following two things happens:
You give away your creations to someone OUTSIDE of your household.
You sell your creations.
When you are making these crafts for decorations in your home or just to help teach someone else how to do it, but the craft stays with you, the cost of supplies are not deductible.
It’s just like buying clothing and makeup that counts for both personal and business use. You can and are using it for personal use and not strictly for business, so it does not count as a deduction.
Making Crafts to Sell
Or maybe you sell your crafts. You can sell them at local craft shows. Or maybe you have a local storefront or work with a local store owner to sell your crafts in their store. Or maybe you just have a shop set up online.
It doesn’t matter how you sell the crafts, but you sell.
All of the supplies and tools that you buy for selling your craft creations do count as deductible, as long as those supplies are being used in the creation of the products that are being sold.
When you start mixing and mingling with personal use, then you start making the whole thing cloudy and messy.
So you want to keep them separate.
If you are going to buy craft supplies for personal use, make sure you buy them on separate transactions and keep them separated from your business supplies.
If you don’t want to keep things separated, then you won’t really be able to get many deductions at all, because an auditor needs to be able to see the clear separation between business and personal use.
Making Crafts to Give Away
Just like with selling your crafts, you can make them to give away as well. The only difference between giving them away and selling is that with giving them away you do not make an income from giving them away. Therefore there is no income to report.
The only caveat with giving them away is that you must give them away outside of your household.
You can’t give your creations to one of your children who lives in your house, or your spouse, or anyone else who lives in your house. It still counts as personal use.
Teaching Craft Classes
You can also teach craft classes and I know this is something that a lot of business owners do. The classes can be taught in person and online. But there are going to be a few differences to what is deductible based on how the class is taught.
When you teach the class in person, you are usually buying all of the supplies that your students will be using. The cost of these supplies is deductible.
You may even have to pay rent to have a room or building to teach your class from. This rent is also deductible.
The cost of the supplies to make your own craft are also deductible when you teach it in a class form in person.
Through the Internet/Video
This is very similar to above when you are teaching a tutorial for your blog or vlog. Yes you are teaching the class and walking them through step by step how to create the craft.
But you don’t have to buy supplies for everyone in the class, you usually provide a list of what is needed and your students will go out and buy the supplies before the class starts.
I do know that you can also create boxes of the supplies that are needed and mail it to your customers. The cost of all supplies and materials used to ship these supplies are deductible, including the cost of postage.
But your own personal creation is only deductible if you are giving it away or selling it. If you just use in your house, let it pile up on your pile of creations in your craft room, or give it to someone you live with, it is not deductible.
Expense Deductions for Crafters and Craft Bloggers
You still qualify for the general expense deductions for running your business, but you may or may not qualify for certain expense deductions based on how you run your craft business.
I’m just reiterating how the IRS sees things. I’m just the messenger.
If you want to take the risk and try to count things as deductible expenses when they really aren’t, good luck. I’m not here to stop you, but be warned, when you get audited, those expenses will be thrown out and you’ll have to pay tax on the income that gets increased due to having them thrown out.
Questions? Anything confusing?