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February 13, 2019


Are expenses related to your side gig tax deductible?

One of the benefits of owning your own business is the ability to take advantage of certain tax savings. In some cases, space in your home used as an office could result in a deduction as well as computer expenses and the like. These more traditional expenses are well defined by the Internal Revenue Service (IRS). For example, a home office deduction requires the taxpayer uses the space regularly and exclusively for business and that the space is the principal place of business.

But what about some of these new side gigs? Opportunities with companies like Rodan & Fields, Beachbody, Scentsy and similar side businesses abound. As noted in a recent piece in Forbes, some of these side businesses state the costs associated with the business are tax deductible. Beachbody, Forbes points out, specifically states expenses like workout gear, a television to watch workouts, cups and gear to make the shakes that are part of the Beachbody diet are tax deductible. Unfortunately, whether or not these expenses are tax deductible is not as clear as the Beachbody marketing info makes it sound.

The IRS has strict rules for business expenses. The taxpayer claiming the expense must be able to establish they were engaged in an activity with an “actual and honest objective of making a profit.” This can include a review of the taxpayer’s business records, expertise, time put into the claimed business and profits.

A failure to abide by these rules can result in an audit, potentially leading to serious penalties. The rules became even more difficulty to navigate with the passage of the Tax Cuts and Jobs Act (TCJA). Essentially, this rule removed the ability to deduct expenses from hobbies…even though you still need to claim income earned.

Tax Controversy