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  1. #1
    Newbie
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    January 18th, 2005
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    Classified as A tax deductable Home Based Biz?

  2. #2
    ABW Ambassador
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    January 18th, 2005
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    Canada
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    1,650
    I don't know how other countries than my own would treat affiliate income, but it would be reasonable to expect that any expenses incurred to earn the income would be deductible against that income.

    In Canada affiliate marketing income can definitely be considered as business income, and all relevant expenses can be deducted, including home office expenses. During the period when I was getting started, I didn't claim affiliate-related losses against other income. (Example: at first the cost of my computer, internet connection, etc. was greater than my affiliate income.) I might have been able to if I could convince the tax people I had a "reasonable expectation of profit" but I didn't push that issue. I simply carried the expenses forward and claimed them against later affiliate income.

    This year my tax bill will be higher than my earnings were in previous years. I have mixed feelings about that, let me tell you!

    Someone whose knowledge I repect told me once that in many cases where an expense is disallowed, it's not because the expense itself was not legitimate, it's because it wasn't properly documented. Save your receipts and keep good records of the money, time and any other resources you spend to develop your affiliate income.

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  3. #3
    2005 Linkshare Golden Link Award Winner  ecomcity's Avatar
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    January 18th, 2005
    Location
    St Clair Shores MI.
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    17,328
    Certainly. Just pay for a local occupational business license and your good to go. I don't know if IRS allows you deduct the amounts bellyup merchants that left oweing you monies from the income.

    WebMaster Mike

  4. #4
    Chick with Brains Tracy's Avatar
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    January 18th, 2005
    Location
    Polk County, Florida
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    If you are using cash basis accounting (which most home-based hobby businesses do), and are only recognizing the income when it is actually received, then there would be no deduction.

    However, if you are using accrual basis accounting and record the income when it is earned, but then never receive the payment. Then you can write it off as "bad debt" expense. Unless you are incorporated, you probably don't use accrual basis accounting.

    Whichever method of accounting you are using, you can deduct the majority of your expenses related to earning the incoming. For instance, your hosting fees, registration fees, advertising on PPC engines, etc. I don't know that you actually have to have an occupational license in order to be in the affiliate marketing business. That all depends on the laws in your area. The best thing to do is call your County Tax Collector, and your City Hall (if you live within the city limits). They can tell you if they require you to have an occupational license or not for what you are doing.

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