There is a lot of confusion about taxes for YouTube Gaming. A few streamers say that nothing needs to be paid, while other broadcasters say that there is no way to deduct anything. When the StreamScheme Team decided to investigate, we didn’t get very far. So, we outsourced this article to an accountant, who happily wrote it for us.
This information is relevant for streamers operating in the United States in 2021, covering the tax year of 2020.
Do YouTube Gaming Streamers Pay Tax?
Yes, if you earned any money from YouTube Gaming, you are required to pay taxes on your earnings in the United States. This includes revenue from ads, donations/tips, sponsorships, and any other method of payment.
Do You Have to Pay Taxes on Donations?
Yes, if you are making income from YouTube Gaming it classifies as income in the eyes of the IRS.
How to Pay Your YouTube Taxes
The way you will pay taxes on your revenue will differ whether or not you stream as a hobby or as a career. The primary difference between self-employment and hobby is whether the goal is to create a profit or for entertainment.
How to Differentiate Between a Hobby and a Career
The IRS provides a list of qualifications that may make a hobby actually a business. Here they are as follows:
- If you manage your channel in a business-like manner and keep track of your records and books, see streaming as a business, not a hobby.
- Putting time and energy into streaming in an attempt to make it profitable would classify it as a business.
- If you depend on the income of your stream to pay bills or live, you are running a business.
- In the event you have losses, if they are out of your control or normal for streaming, it is a business.
- Changing the way you stream or upgrading your features in the event to become more profitable classifies your work as a business.
The IRS will also take the following into account:
- Whether or not you made a profit in a similar endeavor in the past.
- How much profit you make year over year.
- The probability of you earning future money from streaming (and an estimate of how much).
If most of these statements leaned one way or the other on your mindset for streaming, you know where on the spectrum you lay and will be able to determine how you should pay your taxes.
Taxes for Hobby Streamers
Any money made from hobby activities is taxable and should be filed on the taxable earnings section of form 1040 (on line 21 labeled “other taxable earnings.”) If you made more than $600, YouTube Gaming should send you a 1099.
In 2018, the ability to itemize expenses for hobby-related activities was suspended, allowing no deductions allowed for hobby income.
Hobby income does not have any self-employment taxes and is only subject to income tax
Make Tax Time Easier
If the math seems confusing, you are not alone. The good news is that you can make things easier on yourself by using accounting software created for people who are trying to grow their businesses from home.
Using a program like FreshBooks will help you keep track of your stream related income and expenses throughout the year. It makes invoicing people for your services easy and they offer support when you find something confusing.
Then, when it comes to tax season, you will have all of your expenses and deductions itemized to make filing your taxes easier. If you choose to hire an accountant, you can show them your clear paperwork, making it easier for them to get the tax cuts you deserve.
FreshBooks also has a 30 day free trial so that you can see just how valuable of a program it is firsthand.
Federal Taxes for Career Streamers
A career streamer would be responsible to pay Self-employment tax and income tax. Self-employment tax is a set 15.3%. The way the IRS sees it, the money gets sent to the “business” that the streamer essentially works for (even though it is typically themselves).
When the “business” pays the streamer they have to pay both the employer and employee Social security and Medicare taxes. Social security is 6.2% each, and medicare is 1.45% each. Totaled it is 12.4% for social security and 2.9% for Medicare tax. Self–employment tax is on net earnings (revenues – relevant expenses.)
Income tax would be based on any money that the streamer made during the year, less any applicable deductions and expenses.
Income tax is not based on a set percentage of income like self-employment tax is. Instead, income tax is based on the amount of income that a person makes. This is done off of a table.
How Does Federal Tax for FB.GG Streamers Work?
Two notes of importance. Firstly, all of your deductions and such come out of your total earnings before you can determine the taxable earnings. You will fill out the Schedule SE to determine your taxable earnings. You will need Schedule C to fill it out.
Secondly, this is a stair-step method. Just because you may have taxable earnings of say $100,000 does not mean that your tax rate on all of it would be the 24% (if you’re filing as a single). The first $9,875 is still at 10%, the profits between $9875 and $40125 are taxed at 12%, and so on. The only amount taxed at 24% is any profit you receive over $85,526.
The income tax brackets change yearly, so don’t rely on this year’s numbers for next year. (I believe for inflation purposes). Here is the table you will use in 2021 to file your taxes for 2020:
2020 Federal Income Tax Table
|Tax Rates||Single||Married Filing Jointly||Head of Household|
|12%||$9,876-$40,125||$19,751 - $80,250||$14,101 - $53,700|
|22%||$40,126-$85,525||$80,251 - $171,050||$53,701 - $85,500|
|24%||$85,526 - $163,300||$171,051 - $326,600||$85,501 - $163,300|
|32%||$163,301 - $207,350||$326,601 - $414,700||$163,301 - $207,350|
|35%||$207,351 - $518,400||$414,701 - $622,050||$207,351 - $518,400|
|37%||$518,401 +||$622,051 +||$518,401 +|
State Taxes for Career Streamers
Most states also have a similar income tax table. State taxes may be deducted from federal income taxes only if you are itemizing deductions.
What Deductions Can Career Streamers Claim?
If you are streaming to build a career, you might be able to deduct (at least a portion of) purchases and services. Here are typical claimed expenses:
Most of the equipment used for streaming may be deductible. Any equipment that is used solely for the operation of the business is deductible. This may include cameras, microphones, computers, desks, or any other piece of equipment as long as it is only used for streaming activities.
Any upgrades to equipment may be deducted, but it is important to remember that if any equipment is sold, it must be reported as income. Additionally, there is a standard deduction or itemized deductions.
Internet and Program Use
The IRS does allow a partial deduction for expenses required for the business operations that might be used for personal activities. A primary example of this is the internet.
As most streamers broadcast from home, generally the internet is also used for non-streaming activities. For this reason, only a portion of the internet bill would be deductible. In this case, the content creator must estimate the percentage that the internet is used for streaming or personal purposes.
The percent used for streaming is deductible. This is the case with all the equipment or bills that may be present.
Even a portion of a house payment or rent may be attributed to business expenses if there is a room that is allocated specifically to the business of streaming or editing.
Any wages that may be paid to others in assisting the quality or editing of a stream may be deducted as well. (Remember to pay the relevant employer and employee taxes.) Additionally, any employer taxes may be deducted.
As of 2020, you can now claim up to $300 of donations without having to itemize them. You can claim all of your charity spending above that amount if you keep track of exactly how much you spent. This is perfect for channels that frequently run charity streams.
Employment and Income Taxes
Both employment and income taxes must be estimated and paid quarterly. It is best to err on the side of caution because the IRS tends to enjoy charging interest and fees, plus any excess may come back with the tax return.
While you will file your taxes by April 15, you need to make quarterly payments on a 1040-es. You only need to pay estimated taxes if you pay more than $1,000 in federal taxes per year.
What Forms are Involved in YouTube Gaming Taxes?
The following forms will be received or used in the process of paying YouTube Gaming taxes:
- 1099 – received from YouTube or another payer of royalties if you have made more than $600 from the platform. They will send the same figures to the IRS.
- 1040 – normal tax return statement
- 1040 SE – used to make estimated tax payments quarterly.
- Schedule SE – Self employment tax.
- Schedule C – profit or loss from business (has business expenses and income)
YouTube Gaming Tax Case Studies
Here are two case studies (for Federal taxes) that we have used as examples for you:
Marc the Hobby Streamer
Marc is a college student who plays Fortnite on the weekends. His friends have complimented his skill often and suggested he stream. He agreed. While he only started streaming for fun, a few fans have donated to his stream or have given him bits. In 2020, he made $1,235.
YouTube sent him a 1099 for the $630 he made through bits and subscriptions. Streamlabs sent him a 1099 for the donations made through them. Marc is required to claim the taxes as part of his income and will do so on Form 1040.
Emma the Career Streamer
Emma is known for her deadpan humor while she plays retro games. She has been streaming for years and has managed to turn it into a sustainable career. In 2020, she earned $68,200.
She has done the math and has realized that she paid her editor $4,000 through the course of the year and had commissioned for $500, and replaced her Stream Deck for $250. She also split her expenses to account for her home business. Altogether, she has netted $19,750.
Emily subtracts the $19,750 from the $68,200 she received, equalling $48,450 (note: she may be able to take other deductions, including the standard deduction of $12,000, but for the sake of time, we will skip those). From that, she will need to pay the following in taxes:
For the first $9,875, she will need to pay 10% tax ($987.50). For the $30,250 (the difference between $9,875 and the next step, $40,125), she will need to pay 12% tax ($3,630). For the remaining $8,325, she will need to pay 22% tax ($1,831.50). This means she will pay a grand total of $6,449 in Federal taxes.
Frequently Asked Questions
Do you Pay Taxes on YouTube Gaming?
All streamers are supposed to pay taxes to their government for any earnings they earn while broadcasting on YouTube Gaming. The amount will vary depending on how much the streamer earned during the year minus their deductions.
How Do Taxes Work on YouTube Gaming?
Each streamer is responsible to pay taxes according to their government’s regulations. YouTube should send you a 1099 if you are in the USA or a similar statement that you can use to file your taxes.
Is Streaming Considered Self-Employment?
As a streamer, you are considered self employed. You are responsible for building your community and accepting donations. You will need to pay taxes on your tips.
How Many YouTube Gaming Viewers Do You Need to Make a Living?
Does YouTube Report to IRS?
YouTube does report its expenses to the IRS and will let them know which of their streamers received what. You are responsible for filing your own taxes.