One of the best things about being a self-proprietor is you can deduct expenses incurred in running your business.  If you're a blogger and are making some money it is in your best interest to keep track of your income and expenses.

One of my favorite books on this topic is written by June Walker, an accountant that specializes in tax solutions for entrepreneurs – “indies” she calls us.  The book is called Self-employed Tax Solutions, 2nd: Quick, Simple, Money-Saving, Audit-Proof Tax and Recordkeeping Basics for the Independent Professional (Self-Employed Tax Solutions: Quick, Simple, Money-Saving,), and I highly recommend it.

If you've made some money from blogging, there are expenses you can deduct that will decrease your tax liability.  The IRS accepts that a new business may have a rough start financially but they like to see that you've had a profit at least two of seven years [Kosmo, a regular reader and commenter at Out of Debt Again shared this information in the comments below: “Actually, this rule regarding the presumption that an activity is a business vs. a hobby uses the 2/7 year rule only for activities involving horses. For other activities, you have to show a profit in 3 of 5 years in order for the IRS to presume that the activity is a business.  However, this is just a presumption, not a hard and fast rule. You can do a number of things to convince the IRS that you are a business, even if you fail this test. More than anything else, conductive yourself in a professional manners goes a long way. I formed an LLC for my business, have a resale tax certificate from the state, have separate accounts (bank accounts and online accounts) for the business, send formal invoices to freelance clients, etc.”]   This gives a new entrepreneur a chance to get the business going but ideally you want to make a profit from the start, right?  As Ms. Walker says:

Don’t get me wrong — I’m for taking every deduction legally possible, but going into business for that purpose is not what made America great or made any business succeed. Do you think Bill Gates or Oprah or Mark Zuckerberg got started in business in order to deduct their personal expenses?

Ms. Walker explains everything to you in easy to understand terms, and she provides examples which help in navigating the process.

You might say, “I don't need to worry about this, I have an accountant who takes care of everything for me.”  Au contraire.   But your accountant isn't mired in the bowels of your business every minute that you are.   Reading this book will help you track what is needed for your accountant, even if your accountant doesn't ask for it.  Only you can know everything you've purchased for your business, and whether it's a tax deduction or not.  If you don't know, at least hang onto the receipt so that you can ask your accountant.

Here are some business expenses you can take when blogging with a few examples:

• Advertising [business cards, paying for advertising on other blogs, buying product for giveaways, mailing lists]
• Office Expenses [portion of ink cartridges if not strictly limited to business use only, paper, pens, SD cards, headset]
• Utilities [portion of your Internet connection, portion of your telephone]
• Taxes and Licenses [business license fees]
• Bank Service Charges [fees to process Paypal payments, monthly checking account fees]
• Computer and Internet Expenses [web hosting fees, domain registration fees, email fax service, website maintenance, plugins for your blog that you purchase, computer programs for your business]
• Dues and Subscriptions [monthly fee to e-junkie if you sell e-books, monthly fee for Blog Talk Radio, dues paid to associations]
• Postage and Delivery [stamps, postage for giveaways, post office box rental, messenger service]
• Printing and Reproduction [Business checks]
• Subcontractor [Virtual Assistant – issue 1099-MISC if you pay them more than $600 during the year, proofreader]
• Business Gifts [limit of $25 per person/per year]
• Meals and Entertainment [Talking web maintenance over lunch with your server guy counts, keep the receipt and you can deduct 50%]
• Legal and Professional Services [Attorney fees, accountant fees, bookkeeper fees]
• Publications [books, magazines, newspapers, newsletter subscriptions]
• Supplies [for the production of your product]

One other thing I learned from Ms. Walker, of course ideally you want to get all your expenses in the right section, but if you make a couple of mistakes, say you put printing for your business checks under printing and reproduction (as I did above) but let's say it really belongs under bank service fees.  If you are audited, as long as the deduction is legitimate the IRS isn't going to penalize you if you put a few items in the wrong category.  That took a little of the worry off me in trying to get everything exactly right.

Do you do your own taxes, or do you have someone keep your books for you?  Ms. Walker also has a website and blog where she answers questions from clients and readers.  Ms. Walker's book has been extremely helpful for me over the last few years and I highly recommend it!