7 Business Expenses Streamers Should Consider Claiming
Business expenses. What qualifies? What doesn’t? How do I claim them? These are some of the questions I’m most asked when it comes to business expenses for streamers and content creators.
Can Streamers Write Off Games?
Yes, you can write off video games you purchase.
However, these must be games that you play on stream, or intend to play on stream. Common example — you purchase a game from Steam to try out off stream but decide you don’t enjoy it and won’t play it anymore. This game can still be written off because you purchased it with the intent to play on stream.
Let’s use the Cyberpunk release at the end of 2020 as an example. If you purchased the game because it was new and popular and you wanted the ability to stream to your viewers, you can write off that purchase.
There are also times you can write off in-game purchases as well. Battle passes are a great example. This is because though the game itself may be free to play, purchasing the battle pass is what unlocks the full potential of the game and therefore provides the opportunity for better content and a more enhanced viewing experience for viewers.
Purchasing a weapon blueprint in Warzone is another example. If you want to create a YouTube video with a blueprint, that counts as a business expense. It’s ordinary and necessary in order for you to create that YouTube video.
What Qualifies as a Business Expense
To start, let’s understand what qualifies as a “business expense”. To keep it textbook, here’s what the IRS describes as a business expense, “To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business.”.
However, due to how new the industry is and the lack of official tax guidance from the IRS specifically regarding streamers, it’s difficult for streamers to interpret and understand what a “necessary” expense is. As a result, streamers default to what they randomly find on Twitter or follow what their friend did — either of which can often be incorrect.
Wrestling with what qualifies can lead to not writing off an expense, which means you could end up paying more in taxes. That’s because as a streamer you’re a self-employed individual who is taxed on your net income (Streaming/content creation revenues minus all business expenses).
In this article we’re going to dive into what qualifies as ordinary and necessary expenses.
Before we dive in, it’s important to note that these write offs are for streamers who are trying to profit from streaming and establish a career. If you’re streaming as a hobby or for fun, the following expenses won’t be deductible on your tax return.
Streamer Expense #1 - Equipment & Furniture
Streaming equipment and furniture is one of the larger expense categories that can be claimed on your tax return. PC’s, PC parts/upgrades, PC cords and cables, monitors, monitor mounts, cameras, camera tripod, camera lens, keyboards, mouses, mics, microphone stand, controllers, GoXLR, Elgato lights (or other lights), desks, and chairs are all examples.
Small plug — if you run a dual PC setup, be sure to write off both PC’s. If you don’t run a dual PC setup but had an above average year income wise, consider upgrading to a dual PC setup to lower your tax liability (higher business expenses = lower tax bill)
Streamer Expense #2 - Stream Backdrop
This is a category that can easily be missed. For clarity — when I say “stream backdrop”, I’m referring to everything your chat sees behind your face while streaming.
Your stream backdrop may contain a small or large amount of space, but either way it’s something you should capitalize on. Your stream backdrop is what creates the vibe and ambience of your stream — it’s often times what can bring a random viewer scrolling through Twitch to your channel.
Additionally, creating the right ambience in your stream room is what may help you get in the zone to be the best version of you once you’re live. For this reason, some items in your backdrop might qualify as a write off.
Common examples include — spot lights, custom LED signs (such as your streamer name), shelves, items on shelves, posters, oil diffusers, and other items that fit your personality.
You should thoroughly think through these items and make sure they actually apply to your stream backdrop before claiming them as an expense. For example — don’t write off your bed because it’s in the background. The primary use of your bed is most likely not for streaming related purposes.
A good rule of thumb is anything you’ve purchased strictly for streaming purposes that can be visibly seen by your chat while you’re live.
Streamer Expense #3 - App/Software Subscriptions
Discord Nitro — if you’re paying for Discord Nitro and the main purpose is to have better audio quality while streaming, take business calls, or improve your Discord community, write it off. However, if you use Discord for personal purposes as well, allocate an appropriate percentage to business and an appropriate percentage to personal use.
Streamlabs Prime — Your membership to Streamlabs prime is directly related to streaming and can be included as a write off.
Adobe — Any Adobe membership you pay for that’s needed to carry out streaming related work can generally be written off.
Microsoft Office — If you’re using Microsoft office apps for streaming related business, write it off. This includes using excel to track income and expenses throughout the year or Microsoft Outlook for your business email.
Royalty free music subscription — We all know how strict DMCA strikes have become over the last year. If you purchased a royalty free music subscription so you can still play music while streaming, you can write it off.
Malware — If you purchase malware protection for your streaming PC(s), you can write it off.
Streamer Expense #4 - Contracted Work
Contracted work includes graphic designers, lawyers, CPA’s, moderators etc. It’s anyone you’re paying for work directly related to your stream and content.
For this reason, it’s important to keep track of all documentation when paying someone for outsourced work. I know invoicing isn’t something that’s cool or commonly talked about in gaming, but it’s something I’d recommend doing to keep yourself organized.
Additional note — if you’re paying individuals more than $600 for work performed in one year, you could be subject to issuing them a 1099. This is an article in and of itself, so for this article I’ll just plug it as something to be aware of.
Streamer Expense #5 - Stream Room
If you have a room in your home/apartment that is used strictly for streaming or content creation, you can deduct a portion of your home expenses (or rent costs) on your tax return.
You’ll file Form 8829 — “Expenses for Business Use of Your Home” to claim the deduction.
Important note — if you’re not paying the costs of the home or rent for the apartment, you cannot claim your stream room as an expense. In order for a business expense to qualify, it must be money coming out of your pocket. If you’re living at home with your parents rent free, you’re unfortunately excluded from this deduction.
Streamer Expense #6 - Giveaways
Giveaways are a great way to grow your community or thank your current community for their support. Either way, they can be viewed as promotional and are very normal in the course of business for streamers (as we know).
However, to fully comply with tax guidelines, it’s best practice to make sure giveaways are only for followers and/or subscribers. When a giveaway is conducted this way, it can be soundly argued that the giveaway was used to drive business (i.e. gain new followers and subscribers).
If the giveaway is open to anyone, you’re putting yourself in a bad position if audited by the IRS.
Where do I Claim my Business Expenses?
As mentioned at the start of the article, the third common question I get is “Where do I claim my business expenses?”. All income and expenses related to streaming are reported on Schedule C. However, the key is to keep track of all your activity throughout the year so that Schedule C is easier to fill out come tax time.
Though this article lists out numerous business expenses to consider as a streamer, it is not all inclusive. The goal of this article is to provide a strong foundation in what business expenses could look like as a streamer or content creator.
I hope this article will act as a resource and guide you can come back to reference as needed!
Disclaimer: None of the information above is intended as individual financial or tax advice. This article is for educational purposes only. Each individual has a unique tax situation & should appropriately seek a tax professional for guidance.
WRITTEN BY
Juan Rodriguez, CPA Gaming, esports & content creator CPA. Founder of Lodgz Financial.