Nowadays there is a subscription for everything from music, movies, food and clothes for a small monthly fee. Those fees might seem insignificant at first but they can quickly add up and you could be wondering "Can I write them off on my business taxes"?
Unfortunately the answer is not that simple. As required by the IRS, all expenses have to be "ordinary and necessary" to running your business.
My husband is an IT entrepreneur and loves streaming movies (Netflix, Hulu, AppleTV, etc.) for background noise while he works. Can he deduct it as business expense? Nope because streaming movies is not ordinary or necessary to running his business (he was pretty upset about it, you have no idea ). He can totally do his IT work in silence and I would prefer it TBH.
Examples of When Subscriptions Are Deductible
A business owner in the movie industry (videographer, script writer, talent scout, etc.) that uses Netflix to pay attention to new releases, movie ratings, and reviews can deduct it as an ordinary and necessary business expense.
A YouTuber that as a part of her job does research on competitors in her niche on YouTube. In this case, a YouTube subscription is ordinary and necessary for her business.
A traveling massage therapist who uses Spotify for playing relaxing music during sessions. Healing sounds are part of her services therefore those subscriptions are deductible as a business expense.
A mental coach and physiotherapist that uses Calm and Headspace apps to start sessions with his clients and get into a meditation mood. He uses it regularly and strictly for his clients, so those monthly fees can be deducted on his business tax return as ordinary and necessary.
Examples of When Subscriptions Are NOT Deductible
Let's cover some newspapers, and magazines like NY Times, Bloomberg, and Forbes. Unless you are like Richard Gere from Pretty Woman doing business associated with investments, providing financial advice, investment coaching, banking, or your business is highly volatile to stock market changes (like daily Crypto trading) those type of subscriptions are purely personal.
Subscriptions like Netflix, YouTube, Disney +, ESPN, HBO Max, Spotify that are used for personal purposes (ex. drowning out background) even if done while working. If Hulu is not a requirement for doing your job then it is a personal expense. Boo I know!
I know this might not be what you wanted to hear but if the IRS audits your return, you must be able to prove that the subscriptions meet ordinary and necessary requirements.
I hope you already subscribed to our fully deductible newsletters since you are reading this article 😜
Have any other questions?
Reach out to the Collective team at [email protected]
Disclaimer: The information contained in this document is provided for informational purposes only and should not be construed as financial or tax advice. It is not intended to be a substitute for obtaining accounting or other financial advice from an appropriate financial adviser or for the purpose of avoiding U.S. Federal, state or local tax payments and penalties.