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Instagram Taxes: How and What to Pay [2021 US Guide]

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Jonathan
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When it comes to taxes, there is a lot of confusion around what you need to pay as an Instagram influencer. With so much misinformation available online, we wanted to make sure that our information was correct. So, instead of writing about it ourselves, we outsourced this article to an accountant, who clearly understood this issue far better than any of us did.

Instagram influencers must pay tax in the United States. Any money earned from sponsors, stream donations, or anything else must be added up to determine the amount of tax you owe. You may be able to make some deductions for items or services you paid for to run your account.

This information is relevant for Instagram users operating in the United States in 2021, covering the tax year of 2020.

woman sitting on floor doing her taxes

How to Pay Your Instagram Taxes

One of the easiest and most efficient ways to pay your Instagram taxes is with a service app such as Keeper Tax. This program will assist you in inputting the information from your 1099. It will also directly scan your bank and credit card statements for deductibles all throughout the year to ensure that every possible write-off is counted.

Keeper Tax works so well, that their average user will save $6,076 annually. You can also connect the app to your financial accounts to receive notifications about possible deductions. When tax season comes around, you can easily file directly from the app. Not only is the app extremely useful to the busy influencer, but you can try out their service with their 14-day free trial to see the benefits yourself. 

money and keys coming out of a purse

Hobby vs Career Taxes

To help you determine whether or not your influencing is a career or a hobby, the IRS provides a list of qualifications. These are as follows:

  1. Financial Intent

    If you are actively working to make your Insta account profitable, you are treating it as a business.

  2. Record Tracking

    If you track your income and expenses and treat your Instagram account like a business, you likely see it more as a business than a hobby.

  3. Financial Dependence

    If you need the money you earn through your Insta account, it would be classified as a business.

  4. Financial Loss

    If you have some financial loss due to your influence even if it is out of your control, the IRS will typically see it as a business.

  5. Account Improvement

    If you are actively improving the way you run your account in order to earn more from it, you are handling things as a business.

The IRS will also look at the following conditions:

  1. Past Experience

    Whether or not you have earned money through other social media ventures in the past.

  2. Yearly Income

    The amount of profit you make year over year from your account

  3. Future Prospects

    They may estimate how much you will earn in the future if you continue being an influencer.

If the above metrics leaned more toward either business or hobby, you should have a better understanding of where you land on the spectrum, which will help you know what taxes to pay.

Taxes for Insta Hobbyists

The ability to itemize expenses for hobby-related activities was suspended by the IRS in 2018. This means that as a hobbyist, you will not be allowed any deductions. That being said, there is no self-employment tax for income made on hobbies, meaning you will only have to pay income tax.

If you Instagram as a hobby, any income made is taxable. You will need to file it on the taxable earnings section of form 1040 (on line 21 labeled “other taxable earnings.”) Any brand you work with should send you a 1099 if you earned more than $600.

Federal Taxes for Instagram Careerists

If you are a career influencer, you will be responsible to pay both self-employment tax and income tax.  This year, self-employment tax is a set 15.3%. The IRS considers that income goes through the “business” that the influencer works for (even though the influencer technically works for themselves).

As a “business,” you will need to pay both Social security and Medicare taxes for both the employer and the employee. This year, your social security is 6.2% for both the employer and the employee, and medicare is 1.45% each. Add these together and you will have 12.4% for social security and 2.9% for Medicare tax. The good news is that your self–employment tax is based on net earnings (revenues – relevant expenses), so you may not have to pay as much tax as you think.

In addition to social security and Medicare, you will need to pay income tax. You will need to pay this on any income you made during the year (minus any applicable expenses or deductions).

Unlike self-employment tax, your income tax will vary depending on the amount of money you made. You will be able to determine the amount of tax you pay off of a table (there is one included in this article below).

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Make Tax Time a Little Easier

The average person finds taxes daunting even if they aren’t running a business on the side. Make things a bit easier for yourself by using accounting software created for start-ups, home businesses, and people working to create a career online. 

FreshBooks is a program that helps you keep track of both your income and expenses when it comes to your influencer finances. It offers the bells and whistles you need to run the financial side of things, including invoice options. 

Keeping track of your expenses throughout the year will make things easier when it comes to tax time. You won’t have to search for things that you did several months ago because you’ve kept up with the work. Your itemized deductions will help you get tax breaks whether you do your taxes on your own or hire a professional accountant to do it for you. 

FreshBooks also has a 30-day free trial so that you can try out how simple it is for yourself. 

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How Does Federal Tax for Instagramers Work?

There are two things you need to understand about your federal taxes: your deductions should come out first and your tax will be added in a “stairstep” method.

The first thing you need to do is add up all your business expenses so that you can deduct them from your total earnings. The remaining amount will be your taxable earnings. You will show this on your tax forms by filling out the Schedule SE using Schedule C.

Once you have your taxable earning amount, you will consult this year’s tax table to see how much you owe. This will be done in a “stairstep” method based on the table below. For instance, if you earned $100,000, you won’t need to pay 24% of your entire income (if you’re filing as a single). Here’s how it works: the first $9,875 you earned will be taxed at 10%, the profits between $9875 and $40125 are taxed at 12%, etc. The only income that will be taxed at 24% is what you were paid over $85,526.

The income tax brackets will change from year to year, so you should not rely on this year’s table in the future. This is the IRS table to use in the year 2021 to file your 2020 taxes:

2020 Federal Income Tax

Tax RatesSingleMarried Filing JointlyHead of Household
10%$0 to $9,875$0 to $19,750$0 to $14,100
12%$9,876 to $40,125$19,751 to $80,250 $14,101 to $53,700
22%$40,126 to $85,525$80,251 to $171,050$53,701 to $85,500
24%$85,526 to $163,300$171,051 to $326,600$85,501 to $163,300
32%$163,301 to $207,350$326,601 to $414,700$163,301 to $207,350
35%$207,351 to $518,400$414,701 to $622,050$207,351 to $518,400
37%$518,401 or more$622,051 or more$518,401 or more

State Taxes for Insta Influencers

While every state will have a different income tax table, most will be processed in the same way. You may be able to deduct your state taxes from your federal income tax if you itemize your deductions.

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Career Influencer Deductions

Deductions will be based on the IRS’s idea of eligible purchases and services. Here are a few things you may be able to deduct if you are a career-orientated influencer:

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    Internet, Applications, and Housing

    If you have some home services that you also use for your business, the IRS will let you make a partial deduction of the total expense. This will be based on an estimated percentage of how much of the service is used toward the business. Internet usage is a prime example of how this process works.

    Most influencers will work out of their home and their internet usage will include Instagram activities as well as personal use (such as watching Netflix). You must make a reasonable estimate of how much time you spend on business-related activities vs personal use. You may deduct that percentage of the bill as a business expense.

    This process doesn’t apply to just your Internet usage but to any bills (such as electricity) or applications that you regularly pay for. In fact, you may even be able to deduct a portion of your rent or mortgage payment if you have a room that is specifically designated for your business.

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    Photography Equipment and Props

    With so many influencers producing perfect pictures, you may need to invest in a special camera or lighting equipment. The good news is that if you purchase this for business reasons, it is likely deductible. Other eligible equipment may include computers, microphones (for your Insta videos), desks, and any props purchased primarily for business reasons.

    You may also be able to deduct upgraded equipment. Just remember that if you sell your old equipment, you need to report it as income. Some items will fall under a standard deduction.

  • globe

    Travel Expenses

    If you need to travel for a specific Instagram shoot, you will be able to deduct your travel expenses. You should look into specifics concerning these deductions before you leave so that you budget accordingly. Not everything will always be deducted. 

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    Commissioned Work

    Whether you hire a photographer to take images of you at the beach or you have custom graphics made, you may deduct wages paid for commissioned work. You may have to pay the relevant employer and employee taxes, though the employer taxes can be deducted.

  • Charitable Events

    If you hosted a charity event on Instagram and personally donated to it, you can deduct $300 without having to itemize your charity expenses. You can deduct the full amount you spend on charity as long as it is all itemized. 

folder that says empower with a calculator

Employment and Income Taxes

You will need to pay your employment and income taxes quarterly. The IRS will charge interest and fees if you do not pay on time, so it is better to plan ahead, especially since you will get any excess returned to you when you file your tax return.

You will need to make quarterly payments on a 1040-es, though you will still file your taxes on April 15. You don’t have to pay estimated taxes if you pay less than $1,000 in federal taxes annually.

Instagram Tax Case Studies

Here are two case studies (for Federal taxes) that we have created as examples to help you understand the influencer tax process:

  • male

    Brandon the Hobbyist

    Brandon is a college student who plays surfs at the beach on the weekends. Two of his friends photograph him as he catches his waves and he posts the best ones to Instagram. Due to his large following, he has been able to sell some prints of the images online. In 2020, he made $1,265.

    Brandon is required to claim the taxes as part of his income and will do so on Form 1040.

  • female

    Lisa the Career Influencer

    Lisa has built an avid following based around her travels. She is often paid by local attractions to showcase what they have to offer. In 2020, she earned $68,200.

    After doing the math, Lisa discovered that she paid $4,000 in travel expenses, had a few photos edited for $500, and replaced a camera lens for $250. She also split many of her expenses because she works for herself. In the end, she realized that she had paid $19,750 in expenses.

    At this point, Lisa subtract the $19,750 from her initial $68,000 to equal $48,450 (in this post, we are only covering a few deductions. In real life, you may be able to have other deductions, including the $12,000 standard deduction, but we skip those to save time). She will need to pay the following tax based on that amount:

    • 10% from the first $9,875 ($987.50)
    • 12% from the next $30,250, which is the difference between $9,875 and $40,125 ($3,630)
    • 22% from her remaining $8,325 above that amount ($1,831.50)

    Lisa will pay a grand total of $6,449 in federal taxes.

fish in an aquarium group of friends family

Frequently Asked Questions

  • social-instagram

    Do Instagram Influencers Pay Taxes?

    Any influencer who earns income is required to pay taxes on any earnings they receive throughout the year. The tax amount will vary depending on the amount earned minus any deductions.

  • wallet

    How Do Instagram Taxes Work?

    Each influencer must pay taxes in accordance to their government’s regulations. If you earn more than $600 from a brand, they should send you a 1099 if you reside in the United States.

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    Is Being an Influencer Considered Self Employment?

    If you are working for yourself instead of an agency, you are self-employed. This means that you are responsible for paying all of your taxes as both the employer and the employee on any income that you earn.

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    How Many Instagram Followers Do You Need to Make a Living?

    The amount of Insta followers needed to make a living will vary deepening on your niche, your following, and your monetization strategy. Most Instagram influencers earn their money through sponsorships from brands or marketing their own products.