I Have to Pay Taxes on Products Brands Give Me?

One of the biggest misconceptions about taxes is that you only pay on money you receive. But you might also pay taxes on products received. For example, if a company sends you products in exchange for a promotion, the IRS considers that taxable income.

Fair Market Value

For every product you get, you will owe taxes on the fair market value of everything you receive. Fair market value is essentially what the item would sell for if someone bought it in a store.

Generally, you will receive a 1099 form in the mail if you receive over $600 worth of products as compensation. If the total value of the items you get stays under that $600 threshold, you might not even get a 1099 from the brand. However, you are still responsible for reporting that value as income on your tax return.

A Real Example

Let's say a makeup company sends $1,000 worth of products for a post you'll make on Instagram. That $1,000 worth of goods is considered taxable income. Even though you never received cash, you still have to come up with however much you owe out of your own wallet.

This applies to everything - clothes, equipment, golf clubs, and even meals at restaurants. In short, there's no such thing as "free" when it comes to brand deals.

Final Thoughts

Bottom line: before you say yes to that free gear, clothing, or restaurant deal, make sure you can actually cover the tax bill that comes with it. "Free" products aren't really free in the eyes of the IRS - they're income. Plan ahead, set money aside, and you won't be caught off guard when April rolls around.

Written by Matthew Park, LRF Intern & Contributor