Game streaming? Super fun.
However, a large number of people now earn income, sometimes significant income, by streaming their gameplay. Professional gamers sometimes even share the same fame and fortune as professional athletes or actors. With millions of viewers watching from home, streaming revenue has become a significant factor for income taxes.
Gamers, especially professional gamers, are a relatively new phenomenon. However, the tax code has caught up to the times, and there are important tax implications that gamers at every level should know.
Gamer Taxes 101
If you’re a US resident and a gamer, then you will usually pay taxes on your gaming income. Even if some of your gamer income came from overseas tournaments, you’ll still be subject to federal and state taxes (depending on which state you live in.) Professional gamers face additional tax issues if they have tournament earnings, paid appearances, or revenue from multiple states. If you travel for any of your gamer income, you may end up having to pay taxes in multiple states.
The international factor around eSports makes it great for building a global community. Twitch and YouTube Gaming make it easy for people all around the world to come together for competitions hosted in a variety of different countries. However, with international income come international tax issues. You may owe taxes in a foreign country if you earned income there. More than one country may try to claim your earnings from paying competitions, streaming gameplay, product endorsements, or selling merchandise. Come tax season, it’s important for you to know what countries your earnings came from.
Another important element to your gamer tax situation is your entity status. Are you filing as an individual? Is your gaming income earned through a business entity like an LLC or a Corporation? The answer to that question could have a huge impact on what the tax-man claimeth come April 15th. This is one of the many reasons why you should discuss year-round tax planning with a qualified CPA with expertise on gaming income. We can advise you on what entity or formation might be a better tax strategy for you.
Tax Planning as a Gamer
The best strategy for a gamer will depend on each gamer’s situation. A professional gamer may earn income as an independent contractor or employee of a team. A hobby gamer may earn income as a solo player or under their own business entity. For each of these cases, the tax strategy would be a little different. For example, the independent contractor professional gamer would be responsible for paying ALL applicable taxes – none has been taken out of their paycheck in advance. Therefore, that gamer would need to be setting money aside year-round to assure they can cover their tax bill.
If your gamer income has reached a certain level, you may also want to explore paying estimated taxes quarterly. This would help you avoid a larger tax bill at the end of the year by breaking it up into smaller pre-payments throughout the year. To do this, you might also have to set up a business entity for your gaming.
Tax law is also constantly changing. Certain deductions that were once allowed no longer are, while other deduction options might now be available. Can you write off that new microphone? Or streaming fees? Every situation is different, so you must discuss the ins-and-outs of your gamer income with a CPA experienced with gaming.
Gamer CPAs You Can Rely On
At Orsini & Associates, we don’t just talk about gaming – we ARE gamers. (Seriously – follow Partner Garrett on Twitch!) With year-round tax planning services, we can help you make sure your
gaming tax strategy is top-notch. Don’t be one of those suckers shocked by a huge tax bill. Our goal is to help you find a way to legally minimize your tax liability using all the latest tools available to you. Contact us today for a free initial consultation!