Do Canadian Social Media Influencers Need to Pay Taxes?

The number of Canadian social media influencers making incomes of all kinds is growing fast. So, if you are one of them, should you be paying taxes?

Imagine yourself as an Instagram influencer with thousands of followers. You produce and share fashion-related videos on YouTube and Instagram to inspire your audience. It’s a fun sideline that one day might become a big earner…

Just a few weeks ago, one of the season’s most sought-after designer handbags was sent to your door as a present from its creator, along with a note urging you to include it in your next look of the day (OOTD). You upload a selfie of the bag on your stories right away out of enthusiasm, but did you stop to consider whether or not the handbag is taxable?

No, probably not, and you wouldn’t be the only one. The number of Canadian social media influncers making incomes of all sizes in Canada is growing fast. But in the excitement of content creation and Internet fame, it can be easy to forget that your online actions may have income tax repercussions while under constant, intense pressure to produce new content, gain more followers, and establish your brand.

However, the Canada Revenue Agency (CRA) has begun to target social media influencers who are not upholding their income tax commitments because they are well aware that there may be taxes owed, and they may not be getting what they feel is due.

How Do Social Media Influencers Generate Their Incomes?

Influencers on social media have various options for generating cash from their online activities. Social media influencers can have a significant impact on their followers’ purchasing decisions by using their insider knowledge or experience on a particular subject or industry. As a result, businesses have taken notice.

Because of this, social media influencers who have built up a sizable fan base can earn a sizable sum of money from sponsored content, product placements, brand collaborations, and similar opportunities.

Other sources of money for certain influencers on some social media platforms include subscriptions, sponsorships, commissions, direct sales, and referral bonuses. Additional benefits like free merchandise, clothes, trips, or other presents can also be paid benefits.

What are the Things Social Media Influencers Need to Know About Taxes?

The CRA generally considers income from social media as business income, especially if your activities are organized and commercial. This means all your earnings must be reported and are subject to taxation. Here’s a breakdown of key areas influencers need to understand:

Direct Monetary Income

• Fan Subscriptions/Memberships: Revenue from platforms like Patreon, OnlyFans, or channel memberships are fully taxable as business income. Keep meticulous records of all earnings.
• Donations/Tips: Even if not tied to specific content creation, these are reportable as income. Platforms like Twitch or Ko-fi often generate reports to assist with tracking.
• Corporate Sponsorships: Brand partnerships, paid posts, and affiliate marketing income all fall under taxable business income. Clear contracts outlining payment terms are crucial.

The Challenge of Non-Monetary Income

• Free Gifts (PR Packages, Products): The CRA considers these barter transactions. You must include the fair market value (FMV) of received items as income. Determining FMV can be tricky, so detailed records and potential professional valuation are advised.
• Experiences (Trips, Events): These may be fully or partially taxable. A tax professional can assess the value of the “work” performed in exchange and help you determine the taxable portion.

Recordkeeping is Key

• Income Tracking: Have a system to track income from ALL sources, including smaller amounts that might seem less formal. Screenshots and platform-generated reports are helpful.
• Expense Documentation: Deducting legitimate business expenses reduces your taxable income. Save receipts, invoices, and subscriptions related to your content creation.

Tax Filings and Considerations

• Form T2125: Self-employed individuals must file this form to report business income and expenses on their personal tax return.
• CPP: Be prepared to remit both employer and employee portions of Canada Pension Plan contributions.
• GST/HST Registration: If your taxable income exceeds $30,000 over four consecutive quarters, GST/HST registration is mandatory. This means collecting and remitting sales tax on eligible income sources.

Why a Tax Professional is Crucial for Influencers

• Navigating Complex Tax Rules: Taxation surrounding social media income has unique nuances, and regulations can change.
• Accurately Reporting Non-Monetary Income: Calculating the value of gifts and experiences requires careful consideration to avoid CRA scrutiny.
• Maximizing Deductions: A tax professional uncovers all eligible business expenses to reduce your tax burden.
• Proactive Planning and GST/HST: Expert guidance ensures you meet all your tax obligations and avoid penalties.

Can Social Media Influencers Claim Tax Deducible Expenses, Then?

Yes, you can claim tax deducible expenses. Meticulous tracking of legitimate business expenses can significantly reduce your taxable income as a social media influencer. Remember, the CRA requires expenses to be incurred specifically for the purpose of earning business income and must be reasonable within the context of your activities.

Here’s a breakdown of common deductible areas:

Direct Content Creation Costs

• Equipment: Cameras, lighting, microphones, editing software subscriptions
• Props, backdrops, and supplies specifically purchased for content creation
• Studio space (if rented specifically for your influencer business)
• Outsourced content creation services (editing, graphic design, etc.)

Home Office Expenses (If Applicable)

• A portion of rent/mortgage, utilities, and property taxes (based on the dedicated workspace percentage)
• Dedicated office furniture and equipment
• Internet and phone costs (percentage used for your business)

Travel and Experience Expenses

• Travel costs directly related to content creation (flights, accommodations, etc.)
• Event tickets, entrance fees, etc., specifically for content generation
• Be aware: Trips blending personal and business use require careful allocation of deductible vs. non-deductible portions

Marketing and Promotion

• Paid social media advertising and boosted posts
• Website hosting, domain name fees, and professional subscriptions
• Contest/giveaway prizes directly tied to audience growth

Business Development and Education

• Professional memberships and subscription fees
• Courses, workshops, and resources specifically enhancing your content or business skills

Capital Cost Allowance (CCA)

• Larger equipment purchases (high-end cameras, computers) are depreciated over their useful life through CCA. A tax professional assists with proper schedules and calculations.

Important Notes

• Recordkeeping is Crucial: Save receipts, invoices, contracts, and logs (e.g., mileage tracking) to support your deductions.
• Personal vs. Business: Expenses with dual-use require clear allocation of the business portion. (Example: A new phone used for both personal and content creation)
• Consult a Tax Professional:  We can maximize deductions, ensure compliance, and provide guidance on complex areas like CCA.

Getting Help Early is a Good Idea

If you are beginning to develop a following on social media, keep in mind that not everyone who follows you is doing so to only like or comment on your material as you work to expand your brand. The CRA is also online, closely monitoring social media influencers to make sure they are adhering to their income tax requirements related to their online activity.

Not all accounting firms and accountants understand enough about social media influencers to be a big help. However, we have made a point of doing so. So, if you are a social media influencer – or streamer or podcaster – and are starting to make money from your efforts, now would be the best time to contact us to find out more about how we can help you.