Marketing Tax Deductions for Small Businesses

As we get closer to the end of the year, taxes are likely looming in your mind. We don’t like to think about them, but it doesn’t have to be all bad. Whether you ran just one digital marketing campaign or hired a marketing firm to build a new website or advertised your services all year, it’s important to know that marketing expenses are tax-deductible. 

The government allows you to deduct marketing expenses used to generate new business and keep existing customers. Advertising and marketing expenses qualify as “an ordinary, reasonable and necessary tax deduction,” and when done right with a professional web design and digital marketing team like Rooted Web, marketing and advertising can have a high ROI.

Marketing and advertising expenses aren’t a particularly tricky tax deduction as long as they are directly related to your small business’ activities. Below you’ll find eight categories of tax-deductible marketing expenses for small business owners, as well as some that are not considered “marketing,” according to the IRS.

Marketing Tax Deductions for Small Businesses

Marketing and Advertising Expenses

This is a broad category because it covers basically anything you would use to market your small business entirely. This includes SEO services, content writing, newsletters, email marketing, graphic design and branding, display banner ad campaigns, paid media marketing, sales enablement and any marketing plan or strategy created.

If these marketing efforts are done by different companies, make sure to document all of those accounts and companies. To keep things simple, work with a company that can do all of the above for you.

Website Expenses

If 2022 was the year you decided to launch a website or redesign the existing site for your small business, that’s great news, because it’s deductible. This includes designing, developing and customizing your website as well as any website fees for hosting, maintenance and any ongoing website content creation.

Again, make sure to document all of the different accounts and companies you pay each month to deduct these expenses if you use more than one.

Technology and Marketing Software Expenses

If you use a paid customer database, scheduling tool or marketing software that has a monthly or annual subscription, it can be deducted. This includes software such as Mailchimp, Hootsuite, ActiveCampaign, Canva Pro, etc.

Social Media Expenses

There is a lot that goes along with running your social media accounts, and most of this can be deducted at the end of the year. This includes paying a consultant or marketing agency (or anyone outside your company) to run your social media channels and any fees associated with them, content-creation expenses, subscription-based social media sites like LinkedIn Pro and paid ad campaigns on your channels. 

This can also include any influencer marketing expenses, which may require 1099 contracts depending on the amount paid. 

Multimedia Advertising Expenses

This one is pretty self-explanatory, but it includes any ads your business runs on TV, cable or the radio. This also includes any air time purchased on podcasts or other audio-only channels.

Print Advertising Expenses

Yes, print media is still alive and well. Print media includes purchased ad space in magazines, newspapers or on billboards, as well as the creation and printing of advertising materials like brochures, mailers, business cards, etc.

Special Promotions

This is a catch-all category for anything promotion-related that you did throughout the year for your small business. This includes hosting seminars, webinars or workshops to promote your products or services, sponsoring a local event or even paying to have your logo on a local sports jersey, banner or brochure. 

If you ordered promotional swag for your customers or staff to promote your brand or to give out at an event, it is also deductible, so keep track of those invoices.

Consultant or Marketing Agency Retainer

Any cost associated with hiring a consultant or marketing agency to conduct any of the campaigns above is also tax deductible.

Marketing Expenses that ARE NOT Tax-Deductible

Even though there are many marketing tax deductions for small businesses, there are a few things that don’t quite make the cut. These include the following:

• Costs that are primarily personal or hobbies, even though some have promotional value (For example, inviting clients to your daughter’s birthday party and trying to deduct those party costs is a no-no.)
• Costs of personal hobbies carried on with business associates, like taking clients out to a sporting event
• Advertising expenses associated with research and development activities
• Advertising as an Indirect Political Contribution (any publication or website used by or for a political party or candidate)
• The cost of putting up those advertisements you can deduct (like gas to drive your car around town while hanging flyers)

If you have any of the potential marketing tax deductions for small businesses included in these guidelines, check with your accountant to learn what tax deductions and filings are right for you and your small business. As for any of the marketing or web design services listed above, Rooted Web can help with all of them. Our team is ready to make 2023 your best year yet!