As a self-employed individual or small business owner, you likely have various subscriptions that you use for your work. The million dollar question is – can you write these subscriptions off on your taxes? The answer is maybe. Some subscriptions are legitimate business expenses that you can deduct, while others don’t qualify. Here’s what you need to know about writing off subscriptions on your taxes.
What makes a subscription tax deductible?
The key factor determining if a subscription is tax deductible is whether it is an ordinary and necessary business expense. This means:
- It is common and accepted in your line of work
- It is helpful and appropriate for your business
- You incurred the expense while carrying out business activities
Essentially, if the subscription directly benefits your business operations, you can likely deduct it. On the other hand, subscriptions for personal activities are nondeductible.
Common tax deductible subscriptions
Here are some of the most common subscriptions that qualify as tax write-offs for the self-employed:
1. Professional journals and magazines
Staying current on news and information relevant to your industry is a legitimate business need. Subscriptions to professional publications keep you up-to-date and aid your work. Thus, you can deduct subscriptions to journals, magazines, newspapers, and more that relate to your trade or business.
2. Professional membership dues
Joining industry associations and guilds can expand your knowledge and opportunities. The dues paid for these professional memberships are deductible, including dues paid to maintain licenses required for your work.
3. Continuing education subscriptions
Furthering your skills through continuing education is a wise business investment. Subscriptions to online education platforms, such as Skillshare and Masterclass, can provide valuable training at an affordable price. As long as the classes relate to your occupation, these subscriptions can be deducted.
4. Online software and apps
Running a business often requires specialized software and online services. Subscriptions to productivity apps, cloud storage, accounting software, CRM platforms, email newsletters, and any other job-related computer programs are fair game for tax write-offs.
5. Business-only cell phone plans
If you have a cell phone plan exclusively for business purposes, you can deduct the entire cost. If you use the same cell phone for business and personal use, you can deduct the portion of the cost relating to work calls and data usage.
Subscriptions that don’t qualify
On the other hand, here are some subscriptions that the IRS does not consider valid business expenses:
1. Personal entertainment subscriptions
Netflix, Hulu, Spotify, Xbox Live, Pandora, Kindle Unlimited, and other entertainment subscriptions cannot be deducted, even if you enjoy them during work breaks. These types of subscriptions are for personal enjoyment.
2. Fitness club memberships
Gym memberships to maintain personal health and fitness are not tax deductible, even if you exercise for stress relief and increased energy for work. These are considered personal expenses.
3. Personal newspaper and magazine subscriptions
While professional industry publications are deductible, subscriptions to general newspapers, news websites, and magazines for personal reading are nondeductible. Stick to write-offs for subscriptions that directly impact your business.
4. Personal website and cloud storage subscriptions
Subscriptions to services like Netflix, Hulu, Spotify, Xbox Live, Pandora, Kindle Unlimited, and other entertainment subscriptions cannot be deducted, even if you enjoy them during work breaks. These types of subscriptions are for personal enjoyment.
How to claim tax deductions for subscriptions
Claiming subscription tax deductions is easy with a few guidelines:
- Save receipts for all subscriptions to document expenses.
- Deduct subscription costs in the tax year they are paid.
- If billed annually, only deduct months used for business in the tax year.
- Allocate deduction amounts for subscriptions used for both business and personal.
- Report deductions on Schedule C (Form 1040) when you file.
List qualifying subscriptions as “Other Expenses” and include details. The IRS may require documentation if you are audited.
Sample list of deductible subscriptions
To summarize, here is a sample list of common potentially deductible subscription expenses for small business owners and the self-employed:
| Subscription | Potentially Deductible? |
|---|---|
| Industry magazines or journals | Yes |
| Professional membership dues | Yes |
| Continuing education platforms | Yes |
| Job-related software | Yes |
| Business cell phone plan | Yes |
| Fitness membership | No |
| General news and magazines | No |
| Personal cloud storage | No |
| Entertainment subscriptions | No |
Maximizing your subscription tax deductions
As a small business owner, every tax deduction counts. Follow these tips to make sure you fully deduct qualifying subscriptions:
- Take inventory of all subscriptions paid for your business.
- Determine which are exclusively for business versus personal use.
- Calculate allocation percentages for subscriptions used for both.
- Gather invoices and statements to document expenses.
- Deduct qualifying amounts on Schedule C when filing your taxes.
- Consult an accountant if you have questions.
With good recordkeeping, you can take advantage of subscription write-offs and maximize your tax savings each year. Every dollar deducted reduces your taxable income and lowers your tax bill. Plus, the subscriptions help improve your business operations and position you for success.
Explore other deductible expenses
In addition to subscriptions, many other common business expenses are deductible from your taxes. Some additional categories to consider include:
Home office deductions
If you use part of your home exclusively for business, you may deduct a portion of expenses like rent, utilities, insurance, repairs, and home office furnishings. You can either calculate specific business-use percentages or take the simplified home office deduction.
Health insurance premiums
If you are self-employed, you can deduct 100% of health insurance premiums paid for yourself, your spouse, and dependents. This includes long-term care insurance as well.
Retirement plan contributions
Contributions made to SEP-IRAs, Solo 401(k)s, and other retirement plans can reduce your taxable self-employment income. The types and limits depend on the plan.
Vehicle mileage
Track business mileage in your car and deduct $0.625 per mile driven for work in 2023. This covers gas, depreciation, maintenance, and insurance.
Tax prep fees
The cost of hiring a tax professional or accountant to prepare and file your business taxes is deductible, including filing your Schedule C.
Start-up costs
If you launched a new business venture, you may deduct up to $5,000 in start-up costs such as market research, training, copying, travel, and advertising in the first year. Remaining costs can be amortized.
Legal and professional services
Necessary legal, consulting, bookkeeping, payroll and other professional services can be deducted as ordinary business expenses.
Consult a tax professional
Maximizing tax deductions takes strategic planning. Work with a qualified small business accountant or enrolled agent to navigate tax write-offs. They can help identify deductible subscriptions and expenses and ensure full compliance with IRS rules.
Conclusion
Many common subscriptions that are necessary for your work qualify as tax deductible business expenses. But subscriptions for personal entertainment, health, and leisure do not. Keep detailed records of job-related subscriptions and deduct allowed amounts when filing your Schedule C each year. An accountant can provide guidance to utilize every tax deduction available and reduce your self-employment taxes.
