The short answer is that Yes, it is taxable income. But how much tax you'll actually have to pay is what this site [Google Adsense Taxes] is all about. With all the possible Adsense-related deductions, you may even pay LESS tax than without your Adsense income!
Taxes are a very complex issue, and there are many publishers earning anywhere from pennies to thousands of dollars a day. This site's goal is to gather, organize, and share information on how to legitimately minimize tax liability for publishers subject to U.S. income taxes. Imagine your receipts and bills for internet access or that new computer being worth hundreds, if not thousands, of dollars!
How? Google Adsense™ income is business income. Since you are getting paid via a 1099-MISC, which means Google is treating you as an independent contractor, the U.S. Government has decided that income is taxable. More importantly, Google will be reporting your income to the IRS as one of their expenses. Businesses only have to pay taxes on their profits, so listing expenses reduces the tax bill. Just like Google is reporting paying you as an expense, you need to be keeping track of every expense that you can. Just bought a new domain name? Save your receipt!
Thinking about retirement? More good news is that you can also possibly defer paying taxes on your income if you put the money into an appropriate retirement account.
There is also some bad news. You may be subject to self-employment tax, if you made more than $400 your 1099-MISC. The current focus is on individuals, and not corporations or LLCs. Information for other business types and countries may be added later.
Whenever possible, you will be redirected to the specific IRS documents that is applicable. Please check out the categories on the menu bar above.
Does this also apply to other income streams like Linkshare, Commission Junction, other affiliate marketing, Yahoo Publisher Network, Kanoodle, BlogAds, Adbrite, etc.?
Yes. Most legit companies will send you 1099s, but some smaller ones may need some nagging. Remember, if you earned less than $600 they don't have to send you anything. This leads to a smaller paper trail for the IRS to follow, but also remember that audit rates for people who file as a Sole Proprietorship (mentioned in the Tax Basics section), run about from 1-3%. Food for thought...
Read more at the Google Adsense Taxes website.
