Cristiano Ronaldo was 2024’s highest-earning Instagram influencer, receiving approximately $3.23 million per post. [1] This jaw-dropping number is not the typical amount that Instagram influencers earn. In fact, on average, Instagram influencers earn about $2,970 per month. [2] So, how does this relate to tax law? I am glad you asked.
The Internal Revenue Code defines gross income as “all income from whatever source derived.” I.R.C. § 61(a). Accordingly, earnings from social media-related activities are likely income for tax purposes. This post addresses the most likely social media income sources.
As a housekeeping note, while not all individuals earning income in one way or another from social media may consider themselves as “influencers,” the use of the term “influencer(s)” in this post refers to all individuals earning social media income collectively.
Social Media Platforms
Influencers often receive payments directly from social media platforms for profile engagement. How much a social media platform pays an influencer is generally based on the number of subscribers the influencer’s profile has, in addition to the number of views, likes, and comments on posts.
Promotional Items
Influencers are often sent products from companies to wear, test, display, and/or review on their profiles.
Brand Partnerships and Sponsored Posts
Brand partnerships and sponsored posts play a significant role in digital marketing and influencer income. Companies collaborate with influencers and may pay the influencers for the duration of the partnership. In contrast, companies sponsor posts—and pay influencers—on a per post basis.
Advertisements
Influencers earn money for advertisement revenue from many social media platforms. Advertisement revenue is often generated when individuals interact with third-party advertisements placed on influencers’ content.
Paid Subscriptions
Various platforms allow influencers to earn money from paid subscriptions. Influencers utilize the paid subscription model by offering content that is only viewable to subscribers. Some influencers offer multiple tiers of subscriptions, which provide tier-specific content. Certain platforms allow subscribers to request individualized content from the influencer for an additional fee.
Affiliate Marketing
Affiliate marketing is a collaborative type of marketing. Influencers collaborate with companies and mention their products on their profile, including a shopping link or promotional code that connects the specific product to the influencer. The influencer receives a commission when the link or code is used to purchase the product.
[1] https://finance.yahoo.com/news/much-instagram-influencers-2024-10-190156046.html
[2] https://hypeauditor.com/blog/data-from-our-study-of-1865-instagram-influencers/
This post is Part 2 of the Posts, Profits, and Penalties series, and each part can be found by clicking the following corresponding link: Intro and Part 1.
Freeman Law Attorneys
If you have any questions regarding potential social media-related tax issues, Freeman Law can help. We offer value-driven legal services and provide practical solutions to complex tax issues. Click here to schedule a consultation or call our office at (214) 984-3000.
