Guide to Patreon Income Taxes
More and more individuals are discovering the power of online platforms like Patreon to turn their talents into income, but is Patreon income taxable? The short answer to this question (in most cases) is yes!
Turning your hobby into a viable source of income on Patreon sounds like a dream come true. However, it often comes with tax obligations that must be followed. A tax professional can help podcasters and other creators on Patreon fill out their tax forms correctly to avoid penalties from the IRS.
Is Patreon Income Taxable?
Yes, Patreon income is considered self-employment income and therefore is taxable. Creators earning income on Patreon are effectively running a one-person business as sole proprietors unless they set up another type of business entity for tax purposes.
Self-employed Patreon creators have to pay two types of tax: income tax and self-employment tax. Working with an expert in accounting for podcasters and creatives is the best way to understand your obligations, stay compliant, and ensure you benefit from any deductions available to reduce your tax liability.
How Much Do Patreon Creators Pay in Self-Employment Tax?
Self-employment tax is paid according to a flat 15.3% tax rate (limits apply) regardless of your industry. This covers your Social Security and Medicare contributions.
If you're a creator based in the U.S., Patreon will send you Form 1099-K if you meet the earning threshold. This is currently $20,000 per calendar year for U.S. citizens and residents. Even if you don't meet this threshold, you must still report your self-employment income and pay any corresponding tax.
Not Everything on Your 1099-K Is Subject to Tax
Don't be alarmed if you see discrepancies between your 1099-K form and the numbers in your Patreon account. The gross earnings you see on your 1099-K reflect what you earned minus fees or refunds. Fees and refunds are business expenses and must be accounted for when you file your tax return.
People often worry about how much to set aside for 1099 taxes. The tax professionals in our Jacksonville, Florida office recommend setting aside anywhere between 20-35% to avoid a bill you might struggle to pay when tax season comes around.
Remember, Patreon does not withhold any taxes on your earnings. Be prepared to cover the 15.3% self-employment tax plus any income tax you owe on your earnings. As a self-employed individual, you will be required to file an annual income tax return and pay quarterly estimated taxes. You will need to fill out Form 1040, Schedule C, and Schedule SE in addition to your Form 1099-K.
Is Anyone Exempt from Paying Patreon Income Tax?
Some creators may be exempt from paying Patreon income tax, but only if they meet certain filing requirements. You must file an income tax return if you made $400 or more in net earnings. If you earned less than this amount, you may still have to file a tax return if you meet any of the other filing requirements set out in the Form 1040 and 1040-SR instructions.
Don’t Get Caught By Surprise
Work out how much you’re likely to pay in taxes and keep up with your quarterly estimated payments so your tax return doesn't take you by surprise. Consult a tax professional or use a self-employment tax calculator to estimate your tax liability on your Patreon earnings.
How Much Income Tax Do Patreon Creators Pay?
All workers in the United States must pay federal taxes on their income whether they have a regular, salaried job or are self-employed. Because income taxes are graduated, the rates increase as your income grows. Income tax rates start at 10% and rise to 37% for the highest earners.
Ask a Tax Professional Which Deductions Apply to You
Various tax breaks exist to lower taxable income in the United States. Many of these might apply to you. Examples of potential tax deductions include your home office costs, equipment such as microphones, and video and audio editing software.
Do Patreon Creators Need a W-9 Form?
Yes, Patreon creators need a W-9 Form. Self-employed individuals use Form W-9 to send their tax information to the entities that pay them to confirm their taxpayer identification number.
Patreon creators who earn $600 or more in a calendar year must complete Form W-9. Patreon will then use the information on the form to determine if they need to issue you a 1099-K.
Stay on Top of Your Patreon Taxes with Professional Help
Patreon offers a fabulous opportunity for turning your talent into income. Whether you generate your whole income on Patreon or use it as a side hustle to supplement your main income, you're likely to owe taxes on these earnings.
Staying on top of your tax obligations can be a complicated and time-consuming process that takes time and energy away from your creative endeavors. Tax professionals can help you stay compliant while you focus on what you do best.
