How to budget your taxes
Receiving donations, royalties, affiliate and all these different sources of revenue, it is important that you know how your local tax system works so you do not end up as a fly between two nails. It has been seen before that a streamer or blogger suddenly owes back a lot of tax money because of ignorance.
First you need to research the tax structure of where you are from to understand how taxes apply to your various income types. Donations will on some countries be taxed as gifts and in others like a Tip [to a waiter]. Twitch announces their payouts as royalties which have another tax bracket and Affiliate income usually goes as a third bracket.
This can quickly run up and become various different tax brackets you need to keep an eye out for. Which is why we suggest to budget your taxes and here is how to do it in a simple way.
Monthly budgeting of income
We recommend that you create an Excel file that contains the different tax brackets you are to be aware of. Below each bracket, you write the type of income and then use the columns to show each month. The table below is only for showcase and should be altered to match your tax brackets! Also remember to remove fees from the donation, as they are usually tax deductible!
|January Revenue||January Taxes|
|Tips / Gifts (20%)||$2.600||$520|
When you have assessed last months income sources and categorized them appropriately you need to budget the taxes. By budgeting your taxes you simply create a bank account named "Estimated Taxes" and put off the amount from each bracket.
When the year is over, you get yourself a total overview of how much you have earned in each tax bracket, fill in the tax statement from the government and wait to see how much you owe them.
If it is below your takeout then pay the taxes and move the rest to your spending account or let them accumulate for next years taxes. If it, on the other hand, is more than you have taken out then make sure to pay it in full and add a little extra to the account next year.
Disclaimer: This information is informative and made for you to get a good understanding of how to manage your taxes with more ease and less frustration. You are not obligated or in any way forced to follow this information. You are free to do it in any way you desire. You are fully responsible for your finances and to manage them appropriately.