Do Affiliate Marketers Pay Taxes? What You Need to Know

Affiliate marketing involves earning commissions by promoting products or services offered by other companies. Income generated through this business model is subject to tax laws. Like other earnings, affiliate marketing income carries tax responsibilities that require careful attention to remain compliant. Understanding these obligations is important for managing financial affairs effectively.

Understanding Affiliate Income for Tax Purposes

Individuals engaged in affiliate marketing are considered self-employed or independent contractors by tax authorities. Income earned through these activities is treated as self-employment income, not wages from an employer. Taxes are not typically withheld from affiliate commissions as they are for traditional employees.

This self-employment status includes self-employment tax, which covers contributions to Social Security and Medicare. These are typically split between an employer and an employee in a traditional employment setting. As a self-employed individual, the affiliate marketer is responsible for both portions, totaling 15.3% on net earnings.

This rate includes 12.4% for Social Security (up to an annual earnings limit) and 2.9% for Medicare (no earnings limit). For 2025, the Social Security portion applies to the first $176,100 of net earnings.

The income subject to this tax is the net profit from affiliate activities, calculated as gross income minus allowable business expenses. While self-employment tax is distinct from income tax, both are paid by the self-employed individual. If an individual expects to earn $400 or more in net earnings from self-employment, they must report this income and pay self-employment tax.

Reporting Your Affiliate Income

Accurately reporting affiliate income is crucial for tax compliance. Affiliate networks or companies often issue Form 1099-NEC, Nonemployee Compensation, to affiliate marketers if payments exceed $600 in a calendar year. This form details total earnings, and a copy is sent to the Internal Revenue Service (IRS).

All income must be reported, even if a Form 1099-NEC is not received (e.g., when earnings from a single payer are below $600). The primary document for reporting self-employment income and expenses is Schedule C, Profit or Loss from Business, filed with Form 1040. This form allows affiliate marketers to detail their business’s financial performance. To complete Schedule C, this includes reporting gross receipts or sales, which is the total income from affiliate commissions. Maintaining detailed records of all income received, whether documented by a 1099-NEC or not, is important for accurate reporting and to substantiate entries on Schedule C.

Deductible Expenses for Affiliate Marketers

Affiliate marketers can reduce their taxable income by deducting “ordinary and necessary” business expenses. An ordinary expense is common and accepted in the industry, while a necessary expense is helpful and appropriate for the business. These deductions directly lower the net earnings subject to income and self-employment taxes. Common deductible expenses for an affiliate marketing business include:

Website hosting and domain registration fees.
Software subscriptions, such as keyword research tools, email marketing platforms, or graphic design.
Advertising and promotional expenses, including costs for paid advertisements on social media or search engines.
Office supplies.
Home office deduction, if a portion of the home is used exclusively and regularly for business, and it is the principal place of business. This can be calculated using a simplified option of $5 per square foot (up to 300 square feet) or by calculating actual expenses like a percentage of rent, utilities, and insurance.
Professional development, such as online courses, webinars, or conferences related to marketing.
Bank fees for business accounts.
Business-related travel expenses.

Keeping detailed records, including receipts and invoices, for all expenses is important for substantiating deductions in case of an IRS inquiry.

Estimated Tax Payments

Since taxes are not withheld from affiliate income, self-employed affiliate marketers are generally required to pay estimated taxes throughout the year. This ensures that tax obligations are met as income is earned. The requirement to make estimated tax payments applies if an individual expects to owe at least $1,000 in tax for the current year.

Estimated taxes are paid in four installments, corresponding to specific periods of the tax year. The due dates are typically April 15, June 15, September 15, and January 15 of the following year. If any of these dates fall on a weekend or holiday, the deadline shifts to the next business day. These payments cover both income tax and self-employment tax.

Calculating estimated tax payments involves forecasting anticipated income and deductions for the year. It is often helpful to use the prior year’s tax return as a guide for estimating the current year’s tax liability.

Payments can be made through various methods, including IRS Direct Pay, which allows direct payments from a checking or savings account, or through the Electronic Federal Tax Payment System (EFTPS), which offers scheduling options. Alternatively, payments can be mailed with Form 1040-ES vouchers.

Failure to pay enough estimated tax throughout the year or paying late can result in penalties for underpayment. The penalty is generally avoided if at least 90% of the current year’s tax liability or 100% of the prior year’s tax liability (110% for higher earners) is paid.