S Dionne
Playing games allows you to break free of reality and into worlds where anything you dream is possible. However, the virtual world can still produce real-world consequences. For example, professional gamers will often make money for their endeavors. But when this money comes in, it’s not treated the same as it would be regular income. If you’re a pro gamer worried about tax season, here are some tax FAQs that can help you get the answers you need to file your tax returns confidently.
How much will I need to pay for the income I make from gaming?
Much like you would need to be pay taxes for working a regular job, being a gamer is a part-time or full-time business. However, it all depends on what you’re earning and what it’s categorized as. Let’s imagine that you are excellent at playing Call of Duty, whether it’s Black Ops, Black Ops Cold War, Modern Warfare, or beyond. Joining Call of Duty league playoffs, which are now going to be in-person rather than virtual, will give you the ability to show off your skills and earn money.
If you decide to join the upcoming Call of Duty league and end up earning prize money, prize money will have different tax rates than earning a regular income. This is important to note if you earn prizes rather than steady income from your gaming activities. The more you earn, the more you’re going to have to pay (though this will also depend on your individual tax brackets as well).
Meanwhile, those who make income via streaming on Twitch or using other channels to develop active and passive income streams will have to pay income taxes as they would be running a business. Tax rates will depend on what type of business structure you have as well as how much you make. Speaking with an accountant or bookkeeper when you go to file your taxes can help you further identify how much you owe and where you can make deductions.
Is there anything special I need to file my taxes?
If this is your first time filing taxes for your gaming business, there are two main resources you should have: physical materials and software solutions. In terms of physical materials, having items like tax folders, tax envelopes, and other materials to help you organize your financial documents will make it much easier to file your taxes come tax time. Additionally, having folders and envelopes will give you the ability to develop an organizational system for your finances that will benefit you in the future. The more organized you are, the less difficulty you will experience.
You should also look into top tax software solutions so that you have the proper resources needed to file your taxes. There are plenty of great small business tax software products out there to get the job done. If you need to, you can always visit a physical location so you can meet with someone in person instead.
Am I supposed to pay taxes for the virtual products I sell?
As with making money from subscriptions, you do have to pay taxes if you sell virtual goods. For example, if you play World of Warcraft and sell weapons that you secure in-game, that is a money-earning venture when you’re able to make real money from your sales or convert in-game money to real money.
Things become a little more complicated when virtual currency is involved. If you play a game where you make Bitcoin, for example, you have to pay income tax for your earnings as well as capital gains taxes if you sell or exchange your assets. If you can relate to the above, it’s best to speak to a tax expert for additional support.
Earning money for gaming can result in confusing tax liability that makes filing your taxes more difficult. The guide above will help you answer some of the most crucial questions you may have to get your taxes done more confidently!
