After a year like 2020, it has never been more critical to invest in marketing. Did you know a large portion of those expenses are tax-deductible? Just to clarify, a tax deduction is an expense that you can subtract from your yearly income. Deductions are taken before you calculate how much of your income is taxable. If you have enough of them, you can even potentially pull your income into a lower tax bracket.
Of course, not all sales and marketing expenses are deductible, but here, we will break down a few examples of what are.
WHICH MARKETING EXPENSES ARE TAX-DEDUCTIBLE?
Looking at the tax code, the IRS says that a deductible marketing expense must be both “ordinary and necessary.”
To further break that down, you can consider a cost “ordinary” if it’s a common and accepted practice. It is “necessary” if it’s vital to your business’s success.
As an example: You can consider a company website to be “ordinary.” This is because most companies (no matter how big or small) have one. The IRS will also deem it “necessary” because it is difficult to compete with other businesses without one. Because of this, your website (as wells as the software, training, and licenses for it) would count as an advertising tax deduction for your business.
TAX-DEDUCTIBLE MARKETING EXPENSES
- WEBSITE COSTS AND FEES
While a website is crucial to getting your name and message out to a modern audience, the expenses of software and website hosting can add up. Deducting them on your tax returns is 100% allowable.
- MARKETING SERVICES
Hiring professional marketers to aid your organization in marketing services, from digital media to strategic development, offers another tax deduction.
- Public Relations
Public Relations and promotional expenses (i.e., sponsorship of sports teams or promotional items like mugs, t-shirts, and pens) are all considered tax-deductible as well.
- TRADITIONAL ADVERTISING
Advertising in conventional media like newspapers, TV, cable, and magazines is considered tax-deductible. Print advertising materials such as business cards and brochures are also on the list.
- Digital Marketing
Expenses from Google AdWords, e-mail marketing campaigns, or targeted social media campaigns are also tax-deductible in addition to the retainer fees for those who manage them. Additionally, the cost of SEO services is also deductible.
MARKETING EXPENSES THAT ARE NOT DEDCUTIBLE
- POLITICAL CONTRIBUTIONS
A company cannot deduct advertising expenses made to a publication or website used for political purposes.
Although you can deduct the cost of putting an advertisement on a car, you cannot deduct the costs associated with that vehicle such as gas, insurance, etc. as a marketing expense.
ADVANTAGES OF TAX DEDUCTIBLE MARKETING
It can be incredibly helpful for owners to capitalize on tax deductions. The money saved can be the difference between achieving or failing to meet financial goals, which could eventually impact the future of your company. The savings you find can potentially even go towards other investments within the company.
If you need still need help, Denise Calderone CPA is a trusted resource for determining the best way to take advantage of business deductions,
In conclusion, current tax laws are making it easier to minimize your tax obligations when investing in marketing. At 712, we offer full service marketing solutions for a wide array of companies