Turn Your Advertising & Marketing Costs into Tax Deductions
Table of Contents
In addition to guest posting on the UpCity blog, CTRL+ALT Digital is featured as one of the Top Digital Marketing Agencies in the United States. Check out their profile here.
Tax season is here, but before you file, make sure you know how to get the most from your return. Many individuals and businesses are aware of the more common items that can be deducted such as charitable donations but may not be aware that their advertising and marketing expenses can also be deducted. Knowing what’s allowable for advertising and marketing expenses can also help you and your clients strategically expand budgets in certain areas for 2019.
Which advertising and marketing costs does the IRS allow as deductions?
The IRS states that in order for advertising to be deductible it must fall under the category of reasonable and directly related to your business. A few examples of allowable business advertising expenses include:
Digital advertising
Some examples of digital advertising that can be deducted include email marketing, pay-per-click advertising (PPC), display advertising and search engine optimization (SEO). Digital marketing tends to be most effective when using a combination of strategies such as utilizing Facebook Ads for display and Google Ads for PPC, combined with a thoughtful SEO plan. As such, it’s likely that you’ll have licenses to a number of tools/softwares that you may be able to write off as well!
TV, radio and video production
Any TV or radio ads promoting your business are deductible, including all production costs. Additionally, explainer and animated videos are becoming more popular as effective marketing tools to succinctly convey the message. Studies show that users retain 95% of a message when watching it in video form, rather than text. Implementing video as part of a marketing plan can boost conversions while also being a tax deduction.
Photoshoots
If you have a photoshoot for visual content needs for advertising and marketing your business, those costs can be deducted. This even includes clothes for the shoot!
Website
Any costs associated with setting up your business website can be deducted. This can include copywriting, design, development and hosting costs. Be careful to classify your website accordingly though. If it’s an e-commerce site, this can also be deducted, but it does not fall under the advertising expenses category. If you design and develop the website yourself, your time/business expense cannot be deducted.
Event sponsorships
Sponsoring local events or any special events to advertise your business are included in allowable deductions.
Business cards, brochures, and other printed materials
Designing and printing of business cards, brochures or direct marketing pieces are fully deductible. You can spring for the better paper stock without debating about extra costs since you’ll be able to write it off. Postage is also included. The same applies to the printing and production of T-shirts used for advertising and promoting your business.
Meals and entertainment
With the 2018 tax changes, entertainment costs are no longer deductible but there is an exception if the entertainment is for business advertising purposes. For example, taking clients to a professional sporting event is no longer considered an allowable entertainment deduction but putting on an event for the purpose of advertising your business and the entertainment costs associated with it, is an allowable deduction. Meals at the event would also be deductible and not subject to the 50% limit that meals for other businesses purposes are subjected to. You don’t need to produce proof at the time of filing but you should ensure to have receipts handy in case you get audited. Audits can occur within three years of each filing.
More Than Meets the Eye
The above are just a few examples of some of the more common business marketing and advertising costs that can be deducted. The best way to ensure you’re getting the most from your deductions (and also not deducting anything you shouldn’t or categorizing incorrectly) is to have a professional handle your filing.
Nick Wilmot, an Enrolled Agent with Debbie’s Accounting Service, Inc, advises, “Not only does advertising increase revenue but remember when factoring the cost of marketing and advertising you get more than meets the eye. Since you get the expense it lowers your tax bill. For example, spending $2500 on advertising will reduce the business taxable income, and even at a 21% tax rate equates to $525 in tax savings. The end result is really only spending $1975 on advertising.” Knowing all the categories of advertising and marketing costs that can be included in deductions can also help you plan for yours and your clients’ 2019 strategies. As 2019 gets rolling into the second quarter, remind your clients of these allowable deductions and decide where to spend budget that’s most beneficial to their campaigns and marketing goals.
About the author
Jen Stafford
Jen is the CEO and Co-Founder of CTRL+ALT Digital, a full-service digital agency. Her career in digital and advertising spans over 15 years. She has worked with major brands such as Red Bull, the NFL, McDonald’s, Fanatics, The Ad Council, Marriott International, Discovery, and more. Jen also served several years as a board member for both the American Advertising Federation US Virgin Islands chapter and the Caribbean Advertising Federation.
Table of Contents
In addition to guest posting on the UpCity blog, CTRL+ALT Digital is featured as one of the Top Digital Marketing Agencies in the United States. Check out their profile here.
Tax season is here, but before you file, make sure you know how to get the most from your return. Many individuals and businesses are aware of the more common items that can be deducted such as charitable donations but may not be aware that their advertising and marketing expenses can also be deducted. Knowing what’s allowable for advertising and marketing expenses can also help you and your clients strategically expand budgets in certain areas for 2019.
Which advertising and marketing costs does the IRS allow as deductions?
The IRS states that in order for advertising to be deductible it must fall under the category of reasonable and directly related to your business. A few examples of allowable business advertising expenses include:
Digital advertising
Some examples of digital advertising that can be deducted include email marketing, pay-per-click advertising (PPC), display advertising and search engine optimization (SEO). Digital marketing tends to be most effective when using a combination of strategies such as utilizing Facebook Ads for display and Google Ads for PPC, combined with a thoughtful SEO plan. As such, it’s likely that you’ll have licenses to a number of tools/softwares that you may be able to write off as well!
TV, radio and video production
Any TV or radio ads promoting your business are deductible, including all production costs. Additionally, explainer and animated videos are becoming more popular as effective marketing tools to succinctly convey the message. Studies show that users retain 95% of a message when watching it in video form, rather than text. Implementing video as part of a marketing plan can boost conversions while also being a tax deduction.
Photoshoots
If you have a photoshoot for visual content needs for advertising and marketing your business, those costs can be deducted. This even includes clothes for the shoot!
Website
Any costs associated with setting up your business website can be deducted. This can include copywriting, design, development and hosting costs. Be careful to classify your website accordingly though. If it’s an e-commerce site, this can also be deducted, but it does not fall under the advertising expenses category. If you design and develop the website yourself, your time/business expense cannot be deducted.
Event sponsorships
Sponsoring local events or any special events to advertise your business are included in allowable deductions.
Business cards, brochures, and other printed materials
Designing and printing of business cards, brochures or direct marketing pieces are fully deductible. You can spring for the better paper stock without debating about extra costs since you’ll be able to write it off. Postage is also included. The same applies to the printing and production of T-shirts used for advertising and promoting your business.
Meals and entertainment
With the 2018 tax changes, entertainment costs are no longer deductible but there is an exception if the entertainment is for business advertising purposes. For example, taking clients to a professional sporting event is no longer considered an allowable entertainment deduction but putting on an event for the purpose of advertising your business and the entertainment costs associated with it, is an allowable deduction. Meals at the event would also be deductible and not subject to the 50% limit that meals for other businesses purposes are subjected to. You don’t need to produce proof at the time of filing but you should ensure to have receipts handy in case you get audited. Audits can occur within three years of each filing.
More Than Meets the Eye
The above are just a few examples of some of the more common business marketing and advertising costs that can be deducted. The best way to ensure you’re getting the most from your deductions (and also not deducting anything you shouldn’t or categorizing incorrectly) is to have a professional handle your filing.
Nick Wilmot, an Enrolled Agent with Debbie’s Accounting Service, Inc, advises, “Not only does advertising increase revenue but remember when factoring the cost of marketing and advertising you get more than meets the eye. Since you get the expense it lowers your tax bill. For example, spending $2500 on advertising will reduce the business taxable income, and even at a 21% tax rate equates to $525 in tax savings. The end result is really only spending $1975 on advertising.” Knowing all the categories of advertising and marketing costs that can be included in deductions can also help you plan for yours and your clients’ 2019 strategies. As 2019 gets rolling into the second quarter, remind your clients of these allowable deductions and decide where to spend budget that’s most beneficial to their campaigns and marketing goals.
About the author
Jen Stafford
Jen is the CEO and Co-Founder of CTRL+ALT Digital, a full-service digital agency. Her career in digital and advertising spans over 15 years. She has worked with major brands such as Red Bull, the NFL, McDonald’s, Fanatics, The Ad Council, Marriott International, Discovery, and more. Jen also served several years as a board member for both the American Advertising Federation US Virgin Islands chapter and the Caribbean Advertising Federation.
