Taxpayer asks:

Can food bloggers write off ALL or part of their ingredients from the recipes they post on their food blog? And/or, can they write off ingredients from paid campaigns where advertisers paid them to create a recipe?

Taxgirl says:

I’m actually going to answer this question by saying that I’m not going to answer the second part… yet. That’s a different question – and I’m going to address that in my upcoming “paid reviews” post.

The first question is a bit easier and can be extended to all areas of business, including other areas of blogging.

For an expense related to your business to be deductible, it needs to be both “ordinary” and “necessary”. No matter what the industry, that is the standard that the IRS will use. So, any time that you question whether something is deductible, as a first step, ask yourself is this “ordinary” and “necessary”?

    An ordinary expense is one that is common and accepted in your industry. It’s the one time that you care about what your competitors are doing. No matter what your mother says, it does matter whether everyone else is doing it, too.

    A necessary expense is one that is helpful and appropriate for your trade or business. You don’t have to prove that you couldn’t be in business without the expense – more or less, it needs to make good business sense.

Again, for an expense to be deductible, it needs to be both.

Deductible expenses also need to be distinguished from the cost of goods sold; capital expenses; and personal expenses. The cost of goods sold generally includes items like inventory for resale or the cost of raw materials to make goods for sale. Capital expenses encompasses money used for start up costs or improving your business (and must be amortized rather than deducted). Personal expenses are exactly what they sound like: expenses for personal or family use; expenses used for personal and for business purposes must be divided appropriately for purposes of expenses.

So, with all of this info, take a peek at your expenses and start thinking:

1, Is it “ordinary” and “necessary”? If no, not deductible. If yes, then move on:

2, Is it related to the cost of goods sold? If yes, then it’s more properly deducted in the cost of goods sold. If no, or if you haven’t included it in the cost of goods sold, then move on:

3, Is it related to capital? If yes, then you may need to amortize. If no, then move on:

4, Is the expense for an item for your personal or family use? If no, then IT’S DEDUCTIBLE! If yes, then you have a second part of the question: Can the personal use be separated from business use? If so, then you can deduct the part attributable to business use as a business expense. If no, then no part of it is deductible.

    Some examples:

    Home office costs. Yes, deductible, since you can separate your living space from your business space. If you cannot clearly distinguish the two, there’s no deduction. This is why the IRS will require pictures of your space – and maybe even a home visit – on audit. More on home office costs in an upcoming post…

    Automobile costs. Yes, deductible for the business portion to the extent that you keep good records showing how you used your car.

    Clothing/uniform costs. Deductible only if the only purpose of the clothing/uniform is clearly for business purposes (think branded uniforms). It’s not deductible if you could wear the clothes outside of your workplace – even if you personally wouldn’t. A great example here is a suit. I hate suits: you will never, ever see me in a suit outside of court or client appointments. But it is not deductible because it is not unlikely that a suit would be worn outside of the workplace. But a chicken hat from a fast food restaurant? Not likely to be worn outside of the workplace. More on clothing deductions in an upcoming post… But you get the picture.

And here’s where I think your question falls: yes, it’s ordinary and necessary to buy ingredients for the purpose of making food to review. No, it’s not related to the cost of goods sold. No, it’s not related to capital. But is it for personal use? This is what you’re going to have to sort out in order to figure your deduction.

Food that you eat at home is generally not deductible as a business expense. You have to have food to live, which makes it a personal expense. But to the extent that the food that you’re making and trying is for business use, it would be deductible, so long as you can distinguish the personal and business pieces. This means that it will depend on the individual facts and circumstances involved. Here are some examples:

  • Your blog is a baking blog and you make a full course meal, soup to nuts. Is it deductible? Perhaps the cost of the sourdough bread is … but not the rest of the meal.
  • Your blog is a baking blog and you make three loaves of sourdough bread. Is is deductible? Probably the cost of one loaf – that’s the part you needed for your review, right? But not three. The other two are likely to be eaten for personal use and are not deductible.
  • Your blog is a general food blog and you make a lasagne for your entire family. Is it deductible? Maybe. If your blog is a “family food blog”, then perhaps the family-sized portion is deductible. If your blog focuses solely on a niche, like healthy eating or cooking with noodles, then only the portion attributable to you, for the purposes of testing, is deductible.

So, separate, separate, separate.

The same general rules apply to restaurant reviews. To the extent that you order dishes solely for review, then it should be deductible (but only to you, not to your companions) but add-ons like wine and bread may not be.

A couple more caveats: It’s important to remember the hobby loss rules. If you’re blogging as a business, you may have deductions in a year that exceed your blogging-related income; you don’t want to make this a habit or IRS will believe that your blog is a hobby, not a business. If you’re blogging for a hobby, then your deductions may not exceed your blogging-related income.

Also keep in mind that this area is very dependent on fact and circumstances. You need to consider your own situation carefully and not attempt to make something fit that doesn’t. Don’t be greedy: think through your potential deductions carefully and honestly. Remember: pigs get fat, hogs get slaughtered.

You’ll need to retain excellent records with annotations about the expenses. Don’t expect the IRS to allow you to write off your grocery list. Keep your personal expenses distinct from your business expenses. Shop separately for your blog, where possible, and try to buy specifically for your business purpose: don’t buy a dozen eggs, use one and try to write off the other eleven. Keep a good database of which items you used for which recipe (and, if you’re freelancing, for which publication or blog). If you can, it’s best to write directly on the receipt what it was for and how you used it: “lemon curd for holiday meal piece, Gourmet magazine, 12-24-09.”

I’ll be honest and say that I haven’t seen a lot of case law in this area. Blogging and internet-related activities are relatively new to the tax scene, so I’m not sure how the IRS is going to treat some of these specific areas. But the law is the law and the rules about “ordinary” and “necessary”, as well as distinctions between personal and business use, haven’t changed. Don’t get caught up in the “internet-edness” of it all: just follow the rules. That said, if your situation is particularly tricky, you should definitely consult with a tax pro (it’s deductible!) before making any significant tax-related decisions.

Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.

Have a question? Ask the taxgirl!Now on Facebook at http://www.facebook.com/taxgirl

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Author

Kelly Erb is a tax attorney and tax writer.

Comments

  1. This is what I figured. My food blog generates a good income, making it a business and not a hobby. What I planned on doing was keeping my shopping list separate. So I buy all the basics and regular food we normally eat and then on a different purchase, buy what I’ll be using for those specific recipe posts. Since my posts include the recipe and photos, it shouldn’t be hard to track those recipes. I take photos of all the ingredients that I use in that recipe. I just need to make sure to only count what is being used that I wouldn’t normally use or have on hand for specific recipes.

    I’m assuming the pretty dinnerware I buy to take the final food photo is deductible as well right? I only use the colorful, fancy, unique dinnerware to take food photos..not for personal use at all.

    • Lori, to the extent that you can clearly separate those costs, then yes. Sounds like it’s solely for business costs – so yes.

  2. Outstanding post TaxGirl! Relevant, timely and so well written! Thank you for this. I am a Canadian food blogger but your points still apply. Loved the line about pigs vs hogs. Great style. Really appreciated finding you as referenced on Twitter. I will be following and will return. Cheers!

  3. Many years ago I had a client who owned pie shops. One day he told me that he had trouble distinguishing between M&E (meals and entertainment) and R&D (research and development). He said that he would often go to restuarants to taste the pies in order to decide if his shop should make and sell one like it.

  4. Kelly – I never quite got the “ordinary and necessary” issue. Who really decides that? Don’t I make the determination what I think is necessary in my business? How much can the IRS second guess my judgment? If I want the $1000 printer as compared to the $100 one, they can’t say I shouldn’t do it (or won’t get to deduct the $1000 printer) can they? I need a printer at my law office (or two or three) so they cannot say that isn’t an ordinary and necessary item. But, I also have a Keureg coffee maker. I offer my clients coffee, but I also drink the coffee too. Is a coffee maker ordinary and necessary (it’s a really nice coffee maker – easy to use and quick – I never waste coffee since you only make the cups you need)? OK, so what wouldn’t be ordinary and necessary in a law office? A private jet? (It could be necessary depending on your practice). A hot tub? (It would be even nicer than the coffee maker and would relax me after tough meetings, but I’m guessing I’m getting close to not ordinary.) Is it all a judgment call by the IRS on an audit or are there safe-harbors and general rules?

  5. Edward, I think that the key to your question is what’s considered ordinary. And yes, the IRS would look at a set of norms if it came to that. In some instances, yes, a private jet is okay – but is it okay in a small law office that’s not grossing millions of dollars? Probably not. I think you have to look at norms plus what’s considered reasonable.

    Do you have a reason for the more expensive printer or do you just want it? If it performs an essential function that you need, I don’t think cost matters – unless it’s gold plated or something. Then again, ask yourself whether a gold-plated printer seems ordinary and necessary in your particular line of business… I’m guessing not.

    It really is dependent on facts and circumstances. What’s ordinary and necessary in one line of work may be very different in another line of work.

  6. Thanks for the great post. I don’t have revenue yet (just started this past year) but have been keeping receipts where applicable without overdoing it and plan to start advertising this year. If you’re ever up in Bucks County, drop me a line. I can tell you where to eat!

  7. I have been lecturing my client who is an actor in LA who insists on writing off his Haircut! I say nonononono. On the flip side: any movie tic or dvd he buys is fair game for a write-off…because…well, it IS research , isn’t it?!

  8. Hi,

    How do you file your taxes for a blog? What type of business is it considered?

    Thanks!

  9. Did anyone get an answer regarding what Professional Activity code to use on the schedule C for food blogger?

    Thanks!

  10. Great article, Kelly, thank you! I was wondering, would you recommend itemizing each *individual* ingredient in QuickBooks or simply creating a *general* line item called something like “Vegan Chili” (for example) with the *total* cost of all the individual ingredients combined (while retaining the annotated printed receipt, of course). Or even more simple, one line item just called “ingredients” that tally’s the entire cost of all recipes and their ingredients for the entire year. My gut tells me “per recipe” totals are the best bet, but thought I’d ask. TX!

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