Business Expenses
For webmasters, “Business expenses” can be anything from Computer hardware purchases to web-hosting costs. Business expenses are used to offset income earned online to reduce your overall tax burden. Make sure you properly document every business expense so you can deduct it from your revenues. Business expenses can vary quite a bit depending on how you earn money online. If you run a website and make money through advertisements (Adsense, CJ.com, CPALead, etc), any amount of money you spend buying content (Paying freelancers to write articles for you) can be written off as a business expense. If you’re a freelance graphic designer, the money you spend on purchasing software like Photoshop can be written off as a business expense. For both webmasters and freelancers, even purchase of a brand new PC can be labeled as a business expense, provided it is used exclusively for business.
Some common business expenses for webmasters include:
Advertising / Marketing – Examples: Money spent on adwords, buying links, banner ads, purchasing SEO services, etc.
Web Hosting – Examples: Whether you’re on dedicated server or a shared hosting environment, money spent on web hosting is a legitimate business expense for all webmasters.
Content Creation – Examples: Purchasing articles out right or paying free lance writers to create content. Paying someone to create a promotional video.
Website Development – Examples: Paying a programmer to create a custom script. Paying a graphic designer to create a banner. Getting a programmer to fix a bug on your website. Paying someone to create an entire website.
Services – Paying someone to optimize your server for better loading times. Paying a consultant to give your advice on how to get more traffic.
All of these expenses must be reported on Schedule C of Form 1040 for Sole Proprietorships, Partnerships, and LLCs. Only C-Corporations have to report these expenses elsewhere. You shouldn’t organize your business as a C-Corporation without first speaking to a tax professional, as they’re much more difficult to set up and must obey complex rules and regulations.