Tax deductions for video games are hard to come by unless you're in the right profession. An independent contractor working in the video game development industry may swing a deduction or two for video game purchases, just as professional video game player can count the purchases as business expenses. Attempting to secure the deduction outside of the proper profession may generate a closer look into your tax records in the form of an IRS audit.
Video Game Developers
Professional creators and developers of video games can use a variety of tax deductions, including computer equipment, software purchases and even industry-related magazines, to lower overall tax liability at the end of the year. The computer software deduction, in particular, can allow professional game developers to purchase video games created by the competition and write the purchases off as business research expenses. Claiming these deductions may require developers to work as self-employed independent contractors and itemize all tax deductions for the year.
Professional Video Game Players
Yes, professional video game players exist and belong to such professional organizations as Major League Gaming. Taxpayers who earn money through winning professional video gaming tournaments may use purchases of video games and game system platforms as tax deductions because the items directly relate to the profession of professional gaming. In simpler terms, it's the same type of deduction as a carpenter buying hammers, screwdrivers and books on how to make kitchen cabinets. The IRS considers these purchases as tools of the trade.
Personal Vs Business Expenses
It's difficult to make the argument that video game purchases are 100 percent related to business use. The IRS requires each taxpayer making business-related deductions to determine how frequently she used items for business as well as personal use. This percentage determines the size of the deduction a taxpayer may take. For example, a video game developer using video game purchases for business 70 percent of time can deduct 70 percent of the purchase cost as a business expense.
Business Insurance Expenses
A professional video game player, game developer or other professional working in the video game industry may wish to purchase insurance for business-related equipment, including a business computer housing important software. The IRS permits a yearly deduction for insurance purchased to protect business-related assets. This includes purchasing renter's insurance if the insurance covers business property kept in the professional's home. This deduction only includes ordinary and necessary costs of maintaining a liability insurance policy. The IRS does not permit a tax deduction for an insurance policy that is larger than widely accepted as necessary.
- IRS: Deducting Business Expenses
- Bank Rate; A Dozen Deductions For Your Small Business; Dana Dratch
- Major League Gaming: About MLG
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Jonathan Lister has been a writer and content marketer since 2003. His latest book publication, "Bullet, a Demos City Novel" is forthcoming from J Taylor Publishing in June 2014. He holds a Bachelor of Arts in English from Shippensburg University and a Master of Fine Arts in writing and poetics from Naropa University.