Can Streamers Write Off Their Home Office?
Unless you’re as high profile as the folks at N3RDFUSION I feel safe guessing that you stream from home. It’s super convenient and relatively inexpensive. However, did you know that you might be able to write off your home office for business purposes?
I first and foremost want to say that I am not a CPA or tax attorney. While this article is a good guide you should consult with your tax professional (you have one, right?) before taking the deduction. Also, this applies specifically to the US. If you’re outside the US you may have something similar but I won’t know about it.
Does your home office qualify?
The IRS is pretty leery of people taking advantage of this opportunity. They have strict criteria to make sure that you actually should benefit from the program. If you want the full details, read through this.
First, you need to regularly and exclusively use your home office for work. This means it can’t be used for anything besides streaming. My streaming space doesn’t qualify for the deduction. That’s because not only do I play games outside of streaming there but my wife has her desk there.
Second, it need to be your principal place of business. This means that you conduct most of your business there. This is less likely to be an issue for streamers. It’s primarily intended for someone like a lawyer who works from an office outside of the home but also does work in a home office.
Finally, you need to actually be using this space for business! If you’re a hobbyist then you can’t take advantage of this deduction.
How much can you deduct?
Ok, so now that you’ve determined you qualify how much can you deduct? You have a choice between the simplified or actual method. If you need a tax refresher read up here.
You can use the simplified method on up to 300 square feet of home office space. This lets you deduct up to $5/square foot. That means you can deduct up to $1,500. This is considered simplified because you don’t have to account for all of the expenses that went into running your home office.
The actual expenses method has two parts to it. First, you can deduct in full expense that are exclusively tied to your home office. This could include painting the walls or repairing damage limited to the home office. These are called direct expenses
Second, you can deduct indirect expense that relate to running the entire house. These would be things like utilities (including internet), rent (if you don’t own the home), and insurance. If your home office takes up 20% of the home then you can deduct 20% of those expenses. You can do this even with things that would already fall under itemized deductions, like real estate taxes or mortgage interest.
For example, assume you rented an apartment and had a room dedicated solely to streaming which met the home office qualifications. Overall you spent $10,000 on rent and $1,000 on utilities. If your home office took up 20% of the space then you could deduct $2,200 as a business expense. That’s some big savings!
Finally, you can choose to depreciate your home (if you own it). Depreciation is an allowance for wear and tear on infrastructure used for business. Depreciating your home comes with a ton of tax implications both today and in the future. You most certainly should talk with a tax professional before taking depreciation on your home.
While I’ve touched on these benefits, I want to make sure I say them explicitly. There are two major advantages to taking a home office deduction.
First, you move things from itemized deductions to business expenses. This helps you take advantage of them, regardless of whether or not you itemize. The Congress wants to encourage you to start and run a business, this is their way of giving back.
Second, by taking it as a business expense you reduce how much you owe in self-employment taxes. This is a legal form of double dipping on tax benefit and you don’t want to miss it.
The home office deduction can lead to large tax savings if you qualify. Unfortunately, the IRS has quite strict rules around qualifications. If you are careful about meeting the criteria and documenting your expenses you’re making good business moves.
You don’t have to figure this out alone. This is what we do- help streamers make great money decisions. If that’s something that sounds interesting to you reach out me or schedule some time for a free consult. You can check out what I do here. I’m not a tax accountant but my job is to find these kinds of opportunities and connect you with the people who can do the calculation work.