Although many streamers have learned that they are required to pay Twitch taxes, there is still confusion about what expenses they can use as deductions. To answer this question better, we talked to LizTaps, a CPA from Texas who is also a stream mom! She provided us with some basic guidelines that streamers from the US should follow when filing their taxes.
What is a Tax Deduction?
A tax deduction is an expense that you can claim that will lower your tax liability. Not every expense can be used as a business deduction and there are tax guidelines you must follow in order to remain within the law. Deductions will lower your taxable income, meaning you will owe less taxes to the government overall.
Can All Streamers Claim Deductions?
If you are treating your channel as a side-gig or a career, you may be able to claim some expenses as deductions. On the other hand, if you are streaming as a hobby, you will not be able to claim the same expenses to reduce your tax bill.
What Twitch Income Will Be Taxed?
All money you receive for gaming or streaming will be considered income and can be taxed. However, if you live in a streaming or gaming house, money from your roommates to help cover home expenses will not be taxes as it is not considered income.
|Include as Taxable Income||Exclude from Taxable Income|
|Sponsorship winning||Roommate pays you his/her part of the rent|
|Tips/donations from viewers||Roommate reimburses you for groceries|
Typical Stream Deductions
The following chart lists several deductions you can make as a streamer. Note that you should always use the “blush technique” in that you should ensure that you would be able to sit across the table from an IRS agent and be able to explain each deduction without embarrassment.
|Deductible Expenses||Nondeductible spending|
|Streaming content (purchased game or music for primary purpose of playing on stream||Generic clothing. Ex., you like blue, so you buy all blue shirts. Not deductible.|
|Subscriptions to other streamers to monitor content of what’s happening in your market and to get your name in front of other potential viewers||Lighting for your bedroom where you also happen to stream. IRS says you would be lighting your bedroom with or without streaming, so just because you choose cool lights that happen to appear on the stream, they’re not deductible.|
|Hardware / software upgrades, controllers, headphones, tablet||Every meal you eat with a team member|
|Special lighting used for streaming only||There are several other expenses that fall into this column, see * below|
|In-game purchases (part of stream content)|
|Streamer donations and donated subs (advertising to get your name out in front of potential viewers)|
|Branded clothing with YOUR brand (within reason) to promote your brand|
|Travel to conferences and tournaments (hotel, air, mileage)|
|Your portion of shared internet expense (gray area)|
|Partial cell phone (gray area)|
|Purchases to review and share results with viewers|
|OCCASIONAL planning meetings with pizza etc. for filming, other planning activities|
* Always use common sense when writing in your deductions. If there isn’t a business reason for it, do not claim it.
Stream Charity Deductions
In 2021, you will be able to deduct $300 worth of charitable contributions made in 2020 even if you claim the Standard Deduction. This is perfect for those who held charity streams throughout the year to raise awareness for special causes.
While deductions are great for lowering your tax bill, it is important to remember to only claim allowable expenses. If you are in doubt, it is a good idea to reach out to an accountant in your area for help. Make sure to keep all your receipts and keep track of all your earnings throughout the year.