How To Track Blog Expenses and Income
Blogging is a great way to make extra money at home because it generally has minimal start-up fees. There are even free ways to get started. I think that’s why a lot of us got into it.
But as your blog grows you will find it helps to upgrade, which means spending some money. Themes, schedulers, courses. They add up. I know, that’s annoying. You’re trying to make money, not spend it!
Pretty much every small business has to make some sort of financial investment before it starts making money though, and blogging is no exception.
The most important thing is to keep track of all your expenses and any income that comes in. This way you know where your money is going. You can also predict how much money you will have to spend in future years to maintain your blog, which will make it much easier to budget.
The thought of having to keep track of all the financial transactions of a small business can be a bit intimidating. You don’t have to be a master at spreadsheets to run your own business though. A simple worksheet can be used while you get a feel for your business.
And I have a free one for you to start using today.
Here is what you need to be tacking in terms of blog expenses and blog income to be ready for tax time.
Why You Need To Track Blog Expenses and Income
Want to know the secret to make tax returns easier to prepare? Keep track of what you spend! Yes, it is that simple. Tracking your cash flow is the key to getting your taxes filed with minimal pain.
But as someone who has worked with a lot of sole proprietors and small businesses in general, I know that somehow this is easily overlooked.
(Learn more about filing taxes on your business–> How To File Taxes as a Blogger)
What Not To Do When Tracking Blog Expenses and Income
There are a few things you absolutely should not do when tracking your blogging income and expenses.
(If you are trying to make money on Instagram you need to look out for these Instagram tax myths too!)
1. Do not assume you will remember what you spent or made.
I know, you think of course I’ll remember I paid for hosting. Or how could I forget I made this $100?
You’ll forget. It is so easy to forget, especially over the course of the whole tax year. And yes, every cent matters to a business. You can’t deduct what you can’t remember you spent. (But the IRS will remember every cent you made.)
2. Do not assume credit card statements are enough information.
They aren’t. Have you looked at a credit card statement lately? Go online and check. True, you have dates, amounts, and who you paid it too. But it doesn’t really tell you what you spent that money on.
Did you buy something from Target? You can get supplies from Target. But you can also get a whole bunch of personal stuff too. That line item on your statement does not show if what you bought was for your blog or just for your home.
3. Do not assume something isn’t deductible.
Why track information you can’t use later? I suppose my question to you would be How long have you been a tax professional? (And if you are, sorry. You do what you think is best.)
I am a tax professional and I still double-check things at the end of the year. Why not? The worst that happens is that I can’t use the information. The best is that I get an additional tax deduction I would have otherwise missed.
And you should be tracking business expenses so you know how much money your business is spending, not just so you can take tax deductions.
4. Do not assume income doesn’t need to be reported.
There is a lot of misinformation tossed about when it comes to what income needs to be reported. Your best bet? Assume it all needs to be reported.
I personally prefer to report everything and have a higher tax to pay instead of getting audited and facing penalties. But that’s me, you can decide how to handle your personal finance for yourself.
Once again, besides the tax implications, you want to track every cent so you know how much money your business is making! More than that, it is helpful to know how your blog is making that money. Is it from affiliate sales? Ads? Sponsored posts?
Your bank account statement might not give you all the information you need either. You can get a lot of payments through PayPal for example. So how will you know where you were most successful financially?
How To Track Blog Expenses and Income
Alright, so now you know all the reasons you should track expenses and income. How are we going to go about doing that?
If you google income and expense tracker you will find there are a lot of mobile apps available to help you track your expenses and income. The pro of this is pretty clear- it’s easy! You can record data anywhere and have it handy.
The con of this? I’m going to sound old, but what if the app stops working? Do you have a backup system in place?
I love Quickbooks. It’s my favorite way to do bookkeeping. And there are plenty of other computer programs out there to choose from, like Freshbooks.
The pros of this are that there is just so much you can do with these programs! I can run reports, compare data periods, save vendors, and more. It makes it really easy to do long term bookkeeping.
A big con of this is that there can be a learning curve involved. And depending on your experience with this sort of thing it can be pretty steep. And the programs themselves aren’t usually free.
If you’ve just started blogging do you might not be sure how long you will realistically keep it up. Do you need to spend the time and money on something like this?
Pen and Paper
Yep, this is what I recommend if you are just starting out. I know, it sounds archaic, but I have good reasons for this.
Why You Should Track Your Blog Finances on Paper
Alright, I will say that when I say paper that you can substitute a simple blog income and expenses spreadsheet like with Excel or Google Docs. Just don’t rely on a program to do it for you.
Why not use a program? It’s too easy to not really see where your money is going. When you are just starting your blog you don’t have that many expenses and, not to be mean, you don’t have a lot of income either.
If you are just popping information into an app every few months you can easily forget how much you have spent so far and where you have spent it.
Actually doing your own bookkeeping is the best way to really learn how your business works. There just is no substitute for learning the real thing. And if you want to be a successful small business owner, you need to know every aspect of your business.
Don’t worry, I have a free worksheet you can download and start on right away.
How To Categorize Your Blog’s Finances
Writing down what you spend and make is pretty self-explanatory. You need the same main things:
- Date of the transaction
- Who the money was paid to/from
- Amount of money
- What the money was used for
That last one is where it can get confusing. I’ll give you some of the main categories to use. Now, this isn’t an exhaustive list, but it is a good one to start with.
Blog Income Categories
These are the main ways you make money blogging. When you report income it is all just one category, but in order to grow and maximize your income, it is helpful to know how you made your money.
Money made from advertisements on your site.
Money made from being an affiliate. This category includes Amazon affiliate income.
Money made from sponsored posts. Fun fact, this also includes free products you received for review or to just mention on social media. It’s barter income. (Learn more about barter income here—> What Bloggers Need to Know About Barter Income)
Money made from anything you have sold. This includes products, digital products, and services.
Blog Expense Categories
This gets a little muddier. There is information you will want because it helps you run your business, and then there are the categories that get reported on your Schedule C.
By writing down what you spent the money on you will know how to handle it. If you paid for hosting you know that is a hosting fee and that it is a part of keeping your blog on the internet. But it’s also a computer and internet expense. (That comes into play on the tax forms like I said.)
Again, this is not an exhaustive list of categories. The Sch C gives you a spot to make your own, which is quite helpful. But it is nice to know some of the categories already listed. These are just some of the more common ones you can use.
Did you advertise your blog in any way? Promote posts on Facebook, Pinterest, or Instagram? Buy business cards? (Yes, this is still a thing.) These are ways you are advertising your blog.
Do you have a virtual assistant? Did you pay someone to do work on your site to improve site speed or tweak your theme? Contract labor is when you pay someone to do something for you. These are not employees, but they do work for you.
Legal and Professional Services
This is different than contract labor. These are expenses you pay to a lawyer or CPA for example.
This can sound silly because you might not have an office. (Although the home office deduction is something a blogger can take.) Do you need printer paper? A new planner? Pens? Things like that keep you doing your business.
Make sure these items are being used for your business though, not just household items for personal use.
Yes, we just talked about office expenses, but supplies are different. They are specific to your industry. This could mean ingredients for a food blogger to try a recipe. Or in the case of my other blog, it can be supplies to do a science experiment.
Since a lot of bloggers work from the home this sort of business expense can get blurred with personal expenses, so make sure to talk to your tax professional about it.
Taxes and Licenses
Are you an LLC? Do you license photos to use on your blog? Those would go into this category.
Computer and Internet
Hosting fees, domain costs, themes. This is part of running a blog and is often considered a computer expense.
Did you mail anything out to any readers? This can happen if you run a giveaway. Be sure to note those costs and yes, the post office will give you a receipt.
This is where you put the cost of all those courses and eBooks you have bought to improve your blogging knowledge. A lot of these are paid for through PayPal, but you still get a receipt with all the information you need on it.
If you are a sole proprietor or a single member LLC, charitable contributions are ‘passed through’ from your business to your personal filing, but it is still helpful to track what you donated as your business.
Did you eat out for business purposes? This includes meeting with a client, having a business dinner, etc. You can deduct 50% of the value of these meals, but write down to true value as you are tracking your expenses. (That way you don’t take 50% twice, once when you do your bookkeeping, and then again when you report it on your Sch C.)
Travel for business purposes can be deducted. Now, for bloggers, especially travel bloggers, this can get a bit messy. What parts of your travel are personal and what are business? If you traveled for business, talk to your tax professional to make sure it is handled properly.
Do you have business insurance? Track that as well. ‘Blogging Insurance’ isn’t a thing, but check into small business insurance options. The level of coverage you need will vary based on your particular blog and needs.
You can deduct mileage for business purposes. This can be something as small as driving to the post office to mail a product to a customer. The key is, as always, documentation. You’ll want to note the mileage on your car at the beginning and end of the year, and you will want to document every trip taken for business purposes. There are several apps available to help out.
Cost of Goods Sold
Do you make a product that you sell through your blog? The cost of the materials can be deducted. Now, this is the actual cost you paid for the materials, not the amount you charged for them. For example, if you crochet hats and sell them on your blog you want to track the cost of the yarn as a cost of goods sold. You don’t track the amount you sold it for as an expense.
A Few Extras
I put these as extras to track because I don’t want to get you too excited. They can seem like a big bonus, but you want to be careful with them. Blogging is still pretty new in terms of tax law, and since the whole point is that it is something you can do from home with ease, it can be hard to distinguish ‘work time’ from ‘personal time.’
The work that goes into parts of blogging can blur just too easily with personal parts of life, especially when it comes to social media time. Can you always tell what is work and what is personal?
As such, I cannot recommend enough that you should talk to your tax professional about how to go about considering these deductions.
If you are working at home then potentially, you could deduct a portion of your utilities. This ties into the Home Office Deduction. As bloggers spend almost all their work time on the internet, it could be helpful to be able to deduct a portion of the cost.
Again though, you will want to be documenting your internet use. Yes, that means writing down the hours you are online and actively working on your blog.
Yes, cell phones can be deducted as a business expense in as much as they are used for business. That means, you guessed it, documenting your usage for work purposes. If you have a phone used for just work AND a personal cell phone, the work phone costs can be deducted.
Blog Bookkeeping Gets Easier
I know, this sounds like a lot and can leave your brain spinning. Fortunately, when you first start blogging you usually don’t have a lot of consistent expenses. And, not trying to be discouraging, but it can take time for multiple revenue streams to build up.
This is why it is so important to start tracking from the start when it is small and manageable. In time it will become second nature.
As with all things tax, talk to your tax professional about any new business ventures you are undertaking.
In order to be a successful small business owner, you need to understand all the ways your business works. You can do this.
Here is more to help you out!