Having a presence on LinkedIn has become an essential part of doing business for many professionals. With over 800 million members worldwide, LinkedIn is the largest professional networking platform and an important tool for establishing connections, building a personal brand, and promoting a business. For these reasons, many entrepreneurs, freelancers, and business owners choose to upgrade to a paid LinkedIn subscription plan to access more features.
This raises the question – can you claim a LinkedIn subscription as a tax deduction? The answer depends on several factors.
What is a Tax Deduction?
A tax deduction allows you to reduce your taxable income. When you claim allowable deductions, you lower your tax burden by decreasing the amount of income that gets taxed. There are two main types of tax deductions:
- Standard deductions – A set amount that taxpayers can deduct from their income instead of itemizing deductions. In 2023, the standard deduction is $12,950 for single filers and $25,900 for married couples filing jointly.
- Itemized deductions – Deductions for specific expenses, which must be supported by documentation such as receipts. These can include mortgage interest, charitable donations, medical expenses, and more. Business expenses can also be itemized.
So can a LinkedIn subscription count as an above-the-line tax deduction? Let’s analyze further.
LinkedIn Subscription Plans
LinkedIn offers the following paid subscription options:
- Premium Career – $29.99/month billed annually. Gives access to features like InMail messaging, profile highlights, expanded search filters, and learning courses.
- Sales Navigator Professional – $64.99/month billed annually. Offers sales-focused tools like expanded search filters, saved leads, contact insights, and TeamLink collaboration.
- Recruiter Lite – $199.95/month billed annually. For talent scouting and hiring with features like InMail, candidate insights, and pipeline builder.
- Recruiter – $239.95/month billed annually. The full recruiting suite with unlimited InMails, analytics, and team collaboration tools.
- Business Plus – Custom quote. Gives bigger companies access to larger search filters, administrative tools, and integration capabilities.
The specific features and capabilities increase as you move up the tiers. However, all paid plans aim to boost productivity, networking, personal branding, and business development in some form.
LinkedIn Usage for Business Purpose
If you use LinkedIn strictly for personal reasons, then the subscription fees would not be tax deductible. But if you use LinkedIn primarily for business purposes, there is a stronger case to treat the fees as a deductible business expense.
Here are some examples of using LinkedIn for business reasons:
- Making connections with potential clients or partners
- Researching leads and prospects
- Promoting your services, brand, or company
- Seeking freelance work or job opportunities
- Recruiting and hiring employees
- Connecting with industry peers and groups
- Establishing yourself as an expert in your field
Essentially, if you rely on LinkedIn to earn or maintain income for your trade or business, the subscription fees could qualify as a deductible expense.
Self-Employed Tax Deductions
Self-employed individuals can potentially deduct business use of a LinkedIn subscription as part of their Schedule C deductions when filing income taxes. Eligible business owners include:
- Sole proprietors
- Independent contractors
- Freelancers
- Partnerships
- LLCs
- S-corporations
Schedule C is used to report income or losses from a sole proprietorship. In addition to the business income, self-employed filers can deduct eligible business expenses that are considered “ordinary and necessary.” This is based on Section 162 of the IRS tax code.
Ordinary & Necessary Expenses
For a LinkedIn subscription to qualify as a Schedule C deduction, the fees must be both:
- Ordinary – Common and accepted in your trade or business
- Necessary – Helpful and appropriate for your business
Since many self-employed professionals use LinkedIn for networking, client outreach, and marketing, the fees could reasonably meet the criteria of “ordinary and necessary” in relation to earning business income.
Proving Business Use
However, the IRS may want proof that your LinkedIn use is primarily for business, not personal reasons. You should keep records that demonstrate business use, such as:
- Portfolio or services promoted on your LinkedIn profile
- Documented messages sent to prospects or clients via LinkedIn
- Groups and contacts related to your work
- Job search efforts and applications
- Employee recruiting activities
Tracking your LinkedIn activities over time provides documentation in case your return gets audited. It shows the subscription fees directly relate to earning your self-employment income.
Corporate Tax Deductions
If your business is set up as a corporation, the tax deduction rules differ from self-employed Schedule C filers. Here is how a LinkedIn subscription could potentially be deducted:
Sole Proprietorships & S-corps
For sole proprietorships and S-corporations that pass income directly to the business owner, the LinkedIn subscription is handled on the owner’s personal tax return just like a self-employed Schedule C deduction.
C-Corporations
If your business is structured as a C-corporation, subscriptions and dues may be deductible as ordinary business expenses reported on Form 1120. The corporation must pay the fees directly for this tax treatment.
Alternatively, the corporation could reimburse employees for the cost of a LinkedIn subscription if used primarily for business purposes. The reimbursement would be a deductible business expense for the company.
Partial Business Use
If you use LinkedIn for both personal and business reasons, the deduction allowances become more complicated. Only the portion of fees related to business use can be deducted.
You must have a reasonable method for calculating the business percentage. This could be based on metrics like:
- Days/hours you used LinkedIn for business vs. personal tasks
- Number of business vs. personal connections
- Percentage of posts and messages that were business related
Keep detailed records so you can justify the business vs. personal allocation used to determine the deductible amount.
Other Deductibility Considerations
Here are some other factors to keep in mind regarding claiming a LinkedIn subscription as a tax deduction:
- Only the cost of your own LinkedIn subscription is deductible, not ones you purchase for other people.
- The fees must be paid in the same calendar year that you claim the deduction.
- Higher-tier subscriptions generally have stronger deductibility potential since they offer more advanced business capabilities.
- Using a credit card solely for business expenses makes documentation easier.
- You may need to capitalize subscriptions with terms longer than 12 months.
- Contractor positions may have deductibility challenges since LinkedIn could be required by the client.
Recordkeeping Requirements
To claim a LinkedIn subscription fee as a tax deduction, you must have sufficient records and documentation. This includes:
- Receipts or invoices showing the subscription fees paid
- Tax forms used to claim the deduction (e.g. Schedule C)
- Records of how you used LinkedIn for business purposes
- Calculation of the deductible business percentage, if not fully for business
Inadequate records can lead to denial of the tax deduction. You may have to pay back taxes plus penalties and interest if deductions get disallowed on audit.
Contemporaneous Records
It’s best to track your LinkedIn business usage as it happens rather than recreate records at tax time. Contemporaneous records made close to the time of activity are considered more credible.
Examples include:
- A business tasks log describing your daily LinkedIn activities
- Screenshots showing profile views, messages sent, and connections made
- Saved communications with prospects and clients
Tax Treatment Examples
Let’s look at a few examples to see how claiming a LinkedIn subscription fee as a tax deduction could play out:
Self-Employed Landscaper
Laurie is self-employed as a landscaper and pays $29.99/month for a Premium Career LinkedIn subscription. She uses LinkedIn primarily to network with potential clients, showcase her projects, and learn about new landscaping techniques.
Laurie can claim the $359.88 annual fee as a deductible business expense on Schedule C when she files her personal income taxes, given that the subscription is ordinary and necessary for her business.
Contractor Web Designer
Lee is an independent contractor web designer who pays $64.99/month for a Sales Navigator subscription. He uses LinkedIn to find new freelance clients and learn web design best practices.
If a client requires Lee to have a LinkedIn Pro account, that portion of the fees would not be deductible as it is a client requirement. Only the portion of fees related to self-promoting his services would potentially qualify to be claimed on Schedule C.
Corporate Recruiting Firm
ABC Recruiters Corporation has 10 employees who each use LinkedIn Recruiter accounts costing $239.95/month. The subscriptions allow the recruiters to research candidates and make hiring connections.
Since the corporation pays the subscription fees directly, they can deduct the costs as ordinary and necessary business expenses when filing taxes on Form 1120.
Conclusion
Due to LinkedIn’s widespread business uses, the subscription fees can often qualify as tax deductible expenses. However, deductibility depends on several factors:
- Using LinkedIn primarily for business versus personal reasons
- Business structure and how income gets reported
- Keeping detailed records to substantiate deduction claims
- Proportion allocated if used for both business and personal
Consulting a tax professional can help assess whether your particular LinkedIn subscription qualifies to be claimed as a deductible business expense on your tax return. With proper documentation, the fees can potentially lower your annual tax bill.