Barter Transactions: Getting free stuff as a blogger
You know what one of the best perks of being a blogger is? Free stuff. Yep, bloggers and influencers get free items all the time.
Sometimes these goods or services are just a nice gift. But often they are given in exchange for a review, a shout out, or some other sort of mention. That’s fine of course, but it changes things a bit.
The important thing to know as a blogger and small business owner? You do have to pay taxes on that free stuff. Yes, if you get something for free in exchange for a review or mention, that’s a barter transaction. And it requires taxes. Here is what that means.
Barter Transactions
What is a barter transaction? It kind of sounds like something from back in the day. But it still exists in business today.
Barter exchange transactions are when you exchange goods without actual money changing hands. This money limited to cash exchanges. PayPal, credit cards, cash, it’s all the same. If money is changing hands in some way it is not a barter transaction.
What Is Bartering Income for a Blogger?
In terms of blogging, bartering transactions usually mean you accept something for free in return for a review or mention on your blog or social media. This includes, but is not limited to:
- Free Product
- Free Access to a Course or Ebook
- Free Services for you or your family
- Free Consultations or Business Assistance
So yes, that free toy for you to review counts as a bartering exchange. So do any free lessons, like swim lessons, you get in exchange for a blog review. Get free access to a course and all you have to do is plug it on Instagram? That’s a barter transaction.
The basic thing to remember is that if you are providing something for whatever it is you are receiving, it’s a barter and there are income taxes to be paid on it.
How Barter Exchanges Are Reported
How do you know how to report your income on your tax return? There are IRS forms that are used for this sort of reporting. Form 1099-B is often given when a barter trade has taken place.
It is important to note that not receiving a tax form does not mean you don’t need to report your income. There are exceptions for sending out 1099s, so do not depend on getting a form as a reminder to include your barter income on your taxes.
Whether or not you receive a form for your barter income, you still need to report it with your other income (basically somewhere on your form 1040).
How To Calculate Barter Income as a Blogger
So if you don’t receive a form telling you how much your barter income is from the company you have an agreement with, how do you determine what the income is? How is the value of a barter transaction determined?
Fair Market Value
The income or expenses associated with barter income is really based around the fair market value of the item. What is the fair market value? It is the amount a seller could get for an item if they weren’t forced to sell and if the buyer and the seller both have all the facts.
It’s actually easier to figure out than you think. How much is the item selling for? Either on the company’s website or on Amazon. How much is it selling for? That is the fair market value you should be using.
But What Do You Actually Have to Report When?
This is the tricky part. What do you actually have to report? Isn’t there a price limit before you have to report? Are there times when you can take deductions on this income?
Talk To Your Accountant
I’m going to be annoying, but if you want specific answers to your exact needs, you need to talk to your financial professional. There is a lot of confusion over how barter transactions work, especially in the blogging world.
So bring them all your information, and get specific answers that you can’t get from someone over the internet. I can give a few generalities to consider though.
Is the item used up during the review?
Are you reviewing something like a food product for your child? Or perhaps a diaper? These are items that are used up during the testing. Once they are done they are done. These would need to be considered as potential barter income, and they have potential to have an expense deducted because they were used up and have no further personal use.
Is the item something you will continue to use?
Are you reviewing a clothing item or a blanket or anything you will keep and continue to use after the review is complete? These would need to be considered as potential barter income. But because they have continued personal use they might not qualify for any expenses that you can deduct.
Is the item something you will use once and then donate?
Are you reviewing a game or toy that you will use for the review, but then plan on donating to Goodwill or some other charity? These would need to be considered as potential barter income. But because you did not keep them for personal use, they might have potential deductions associated with them.
What about the $25 Limit?
Ah yes, the idea that if an item is given is less than $25 fair market value it doesn’t need to be reported. This is true if the item is a freely given gift. That is you receive it with no expectation for review or mention. As for items given in exchange for review? Best bet is to mention it to your accountant.
How To Report Barter Income in Your Personal Bookkeeping
You should talk to your accountant before finalizing any tax reporting of your barter income. But before you do that you should be keeping track of it in your blog bookkeeping.
(Need help with keeping track of all your info? This will help—> Blog Bookkeeping Organization)
The best practice is to record anything received for free, be it for review or just a freebie, with your other blog income. Then you have it ready to go come tax time. You won’t have to dig around for it, and you won’t accidentally miss anything.
You can then confer with your personal tax professional to determine what sort of income and expenses reporting is appropriate for your situation.
The Short Version of Barter Income
The short version of all this? Anything you receive in exchange for review or mention can be considered barter income. This is potentially taxable income. As such, you need to note it in your personal bookkeeping and report it on your taxes.
The world of barter income and freebies can be a bit confusing, so this is something you definitely want to bring up to your accountant to determine the best course of reporting action for you.
Not knowing that you have received barter income or not getting a 1099-B is not an excuse to not report that income. If you receive something for free you are responsible for determining your personal finance tax liability.
Here is more to help you out:
Barter Transactions and Business Taxes
Top Tax Deductions for Bloggers
In a couple of my blog posts, I have a link to an e-subscription for books. When someone signs up using my link, I get a free month of that subscription. Does this count as a barter transaction? Thanks for all of these legal posts! They have been so helpful!
It is certainly something worth mentioning to your tax professional when you prepare your taxes. You are receiving a form of compensation similar to an affiliate link where you receive payment, which means it is a good idea to consider it as a potential barter transaction.