Since many photographers indulge in the art as a hobby (that is obviously not taxable), you need to be sure to categorize your work correctly. If you earn any income from selling your pictures, you’re liable to pay taxes even if you receive small token amounts. This rule applies regardless of whether you work as a photographer for a few hours each week, full-time, or as a second job. You must also keep a careful record of the expenses you incur, including the cost of travel, equipment, or any other overheads. Collect the receipts of all expenses carefully because you’ll need to submit them at the time of filing your tax returns.
If you’re holding a job as a photographer for a US employer, your taxes will likely get deducted before you receive a salary. However, if your employer is a foreign national, the taxation laws in their country will apply. In any case, you’ll file returns according to the regulations for US citizens.
The Same Rule Applies for US Expats
If you’ve chosen to work in any country overseas, check with an expert expat tax consultant to understand the tax implications for US expat photographers. Even if you’re paying a high rate of income tax in your home country, you’ll continue to file returns with the IRS. Make sure to keep up with your tax obligations or you risk incurring fines and penalties. If you’re earning an income in a different currency, you calculate the average exchange rate for the year and pay your dues accordingly.
US Taxation Laws Have Allowances for Avoiding Double Taxation
US laws have several allowances that you can use to avoid paying taxes in both countries. For instance, the Foreign Earned Income Exclusion (FEIE) permits you to pay taxes only over and above a certain fixed income limit. Each year, the IRS sets an income limit for US expats. You’ll pay taxes only on the earnings left over after deducting this amount which is $12,400 for the year 2020.
The IRS also permits a Foreign Tax Credit. Accordingly, you are allowed to deduct the tax paid abroad from the applicable taxes in the US returns. Although you may not be able to claim dollar for dollar exemption, you won’t need to pay double taxes on your earnings. Like your tax consultant will advise, you’ll fill an IRS Form 1116 to claim this benefit.
Freelance Photographers Need to Pay Self-Employed Taxes
The IRS considers a freelance photographer to be an owner of a small business, an independent contractor, or a proprietor. For this reason, you’ll pay taxes on the net self-employed income after deducting all the expenses you incurred for running your business. This is true regardless of the country where you’re earning the income. These dues include Social Security and Medicare and you’ll make payments each quarter according to your income expectations.
Taxation implications for US expat photographers can be complex. Make sure to check with your tax consultant for expert advice on how to stay on top of your obligations.
Article written by Marc
(Photo by m0rdc via Flickr)