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As a streamer, you probably wonder what you need to know when it comes to paying taxes. In this article, we are going to discuss how live streaming is considered a business or hobby in the eyes of the IRS, what qualifies as a deduction if you are considered a business, and break down how much tax you’ll need to pay depending on how much money you made.

Before we get into it, we are providing this material for informational purposes only. It should not be relied on for tax, legal, or accounting counsel. If you have questions or concerns regarding the taxes you need to pay, we highly recommend working with a tax professional.

Above all else, the most important thing to remember is that if you earned any money from Twitch, Facebook, YouTube, or any other creator platform, you must pay taxes on your earnings! This includes revenue from ads, donations/tips, sponsorships, or any other payment method.

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How do you distinguish between a business and a hobby?

Whether or not you classify as a career streamer or a hobby streamer, the taxes you pay and what you are eligible to deduct from your taxes will vary.

So how do you know if live streaming is just your hobby or your business?

The IRS defines a hobby as something one does not participate in for-profit; this includes activities done mainly for sport, recreation, or pleasure. Below is a list of other deciding factors you should weigh to determine if live streaming is viewed as a business.

Whether or not you classify as a career streamer or a hobby streamer, the taxes you pay and what you are eligible to deduct from your taxes will vary.

So how do you know if live streaming is just your hobby or your business?

The IRS defines a hobby as something one does not participate in for-profit; this includes activities done mainly for sport, recreation, or pleasure. Below is a list of other deciding factors you should weigh to determine if live streaming is viewed as a business.

  • Whether you carry on the activity in a businesslike manner and maintain complete and accurate books and records.
  • Whether you have personal motives in carrying on the activity.
  • Whether the time and effort you put into the activity indicate that you intend to make it profitable.
  • Whether you depend on income from the activity for your livelihood.
  • Whether losses are due to circumstances beyond your control (or are expected in the startup phase of your type of business).
  • Whether you or your advisors have the knowledge needed to carry on the activity as a successful business.
  • Whether you were successful in making a profit in similar activities in the past.
  • Whether the activity makes a profit in some years and how much profit it makes.
  • Whether you can expect to make a future profit from the appreciation of the assets used in the activity.

You may find more information on this topic in section 1.183-2(b) of the Federal Tax Regulations.

You can visit this website to learn more about how the IRS distinguishes between a business and a hobby.

One important factor you should keep in mind when deciding what type of streamer you are is that in 2018, the IRS suspended the ability to expense items related to hobby activities. This means any new equipment, gear, or parts you purchased for streaming activities can not be deducted as they are not a part of your business.

Additionally, hobby income does not have any self-employment taxes and is only subject to income tax.

How do you distinguish between a business and a hobby?

Taxes for Hobby Streamers

Any money you earned from streaming must be taxed, even if you are a hobby streamer. If you made less than $600, you should file them on the taxable earnings section of form 1040 (on line 21 labeled “other taxable earnings.”)

If you made more than $ 600, Twitch should send you a 1099 form.

Taxes for Career Streamers

As a career streamer, you are technically self-employed and thus considered both the employee and the employer. This means you are responsible for paying self-employment tax and income tax.

The self-employment tax rate is 15.3%. The rate consists of two parts: 12.4% for social security and 2.9% for Medicare. Since you are the “business” paying yourself as the “streamer,” you 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. Total it is 12.4% for social security and 2.9% for Medicare tax. Self-employment tax is on net earnings (revenues – expenses), equaling 15.3%.

Income tax is based on any money that the streamer made during the year, minus applicable deductions and expenses. It 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.

Taxes for Streamers

How Does Federal Tax for Streamers Work?

There are two important points to note when it comes to federal tax. First, all of your deductions come out of your total earnings before determining the taxable earnings. You will fill out the Schedule SE to determine your taxable earnings. You will need Schedule C (Form 1040) to fill it out.

Second, this is a stair-step method, meaning the percentage you are taxed varies depending on how much money you made. Earning 0100,000 does not mean you pay 24% tax on all of it. The first 09,875 is still taxed at 10% while anything between 09,875 and 040,125 is taxed at 12%, and so on. The only amount taxed at 24% is any profit you receive over 085,526.

Here is the table you will use to file your taxes for 2020:

Tax Rates Single Married Filing Jointly Head of Household
10% $0-$9,875 $0-19,750 $0-$14,100
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 +

Please note, the income tax brackets change yearly. Your tax brackets for next year are subject to change!

How does Federal Tax Work for Streamers?

State Taxes for Career Streamers

Taxes will vary from state to state. We recommend researching your state tax to know what you’ll owe.

What Deductions Can Career Streamers Claim?

If you are streaming to build a career, you might be able to deduct at least some expenses. Here are typical claimed expenses:

Streaming Gear

The IRS describes expenses as “the cost of carrying on a trade or business.” Expenses are usually deductible if the business operates to make a profit. The good news is that most of the gear you use for streaming can be deducted if you are a career streamer. This may include cameras, microphones, computers, desks, or any other equipment as long you only use it for streaming.

Internet Use

As a self-employed streamer, you can deduct a portion of your internet. Unless you have an office that is used 100% for streaming, the chances are high that you also use the internet at home for leisurely activities. In this case, only a portion of the internet bill would be deductible. As the content creator, you will have to determine the percentage that the internet is used for streaming or personal use.

The percent used for streaming is the deductible part.

Commissioned Art/Design Work

Many streamers work with artists, designers, or editors to create assets for their stream. Any fees paid to others in assisting in the quality or editing of your stream may be deducted as well. (Remember to pay the relevant employer and employee taxes.) Additionally, any employer taxes may be deducted.

How does State Tax Work for Streamers?

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 Twitch Taxes?

The following forms will be received or used in the process of paying Twitch taxes:

  • 1099 – received from Twitch or another payer of royalties if you have made more than 0600 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)