Is Advertising Tax-Deductible?
Small businesses need to leverage every opportunity to make - or save - money. Don't overlook your marketing expenses the next time you run the numbers. Tax deductible expenditures could lower your taxable income and save you thousands on your next filing. Find out what the IRS considers marketing and what specific advertising expenses are most likely deductible.
The Internal Revenue Service’s Definition
The IRS has a relatively broad inclusion of marketing expenses that are tax deductible. To qualify, the expenses must be:
Reasonable and directly related to business activities.
Support the brand or be “helpful and appropriate” for the business.
Focused on keeping the business name in front of a relevant audience.
There are slight variations in how the IRS discusses marketing to other business expenses, but it mostly boils down to this: If it helps your business stay relevant, you’re in the clear.
Deductible Marketing Expenses: Don’t Forget These On Your Taxes!
Most of your company’s marketing and advertisement expenses are tax-deductible; if you’re unsure, check with a CPA. Start with the biggest marketing investments first:
Building a new website or maintaining an existing site
On-going or project-based content marketing, SEO, graphic design, and paid media expenses
Event sponsorship or hosting events
Marketing software and subscriptions (more on this in a second)
Getting a website is a tax write-off. Sponsoring the local cake walk; write off. Running a paid campaign on social media, yeah, that’s totally a write-off. Keep track of everything related to marketing, including the competitively-priced services of your favorite marketing company.
Marketing and Taxes FAQs
Business taxes are incredibly nuanced, especially as state and federal regulations revert to something like normal after the COVID-19 pandemic. If you’re unsure about what you can and can’t write off, contact a CPA. That said, some answers are relatively clear-cut.
How Much Can You Write Off for Marketing Expenses?
Businesses can write off up to 100% of their advertising costs or a maximum of $5,000 annually. According to the US Small Business Administration, you’re probably spending 2-5% of total revenue on marketing; retailers typically spend about 4%.
Are Subscriptions Tax Deductible?
You bet! Marketing-related subscriptions and software are tax deductible, which means you can write off the monthly or annual costs of your:
Email marketing platform
Customer relationship management (CRM) software
Social media publishing platforms (Hootsuite, Loomly, Buffer, etc.)
Website subscription and domain
Email email and workspace software (Microsoft 365, Google Workspace)
Because annual subscription costs are relatively fixed, they’re a great place to start when locking in your marketing budget.
Are Giveaways Tax Deductible?
You bet! Businesses can deduct the inventory cost of the item but not the retail price. If you’re giving away a bike, for example, you would be able to deduct:
The wholesale cost of the bike
Shipping charges
Taxes on the bike (once in inventory)
Keep track of smaller promotions, too. For example, if you give away a water bottle with every sale, deduct the cost; that’s a great marketing tactic!
We’re Not Tax Experts (But We’re Pretty Good at Marketing)
Sovis Media knows its way around a 1099, but our real expertise isn’t taxes. We’ve helped small businesses make smart marketing decisions and grow their brand with a unique mix of affordable marketing services for nearly a decade. Get in front of the right people at the right time with Traverse City’s marketing pros. Start the conversation and contact us today! (Tomorrow works, too.)