What taxes Substack writers owe
The moment a reader pays for your newsletter, that money is self-employment income in the eyes of the IRS. Unlike a W-2 job where an employer withholds taxes, Substack sends you the full payout (minus their 10% cut) and leaves the tax math entirely to you.
You're on the hook for three layers of tax:
| Tax Type | Rate | Notes |
|---|---|---|
| Self-employment (SE) tax | 15.3% | Covers Social Security (12.4%) and Medicare (2.9%). Applies to net profit after deductions. You can deduct half of SE tax from gross income. |
| Federal income tax | 10%–37% | Depends on your total taxable income and filing status. 2025 standard deduction is $15,000 (single) or $30,000 (married filing jointly). |
| State income tax | 0%–13.3% | Varies by state. Nine states have no income tax. California tops out at 13.3%. |
A rough rule of thumb: set aside 25–30% of every Substack payout for taxes if you're in a moderate income bracket. If you're already in a high-income W-2 job and your newsletter adds on top, that number can climb higher.
The good news: you only owe SE tax on your net profit — revenue minus deductible business expenses. Every legitimate deduction you claim reduces both your SE tax and your income tax, so tracking expenses carefully is worth real money.
Does Substack send a 1099?
Yes — but the details matter. Substack processes payments through Stripe, and it's Stripe (on Substack's behalf) that issues the 1099-K form. For 2025, the threshold is $2,500 in gross payments. If your subscribers paid a combined total of $2,500 or more through your Substack during the year, expect a 1099-K in January or February of the following year.
There's an important nuance here: the 1099-K reports your gross subscription revenue — the amount your readers paid before Substack's 10% fee was taken out. So if your readers paid $5,000 total but you only received $4,500 after fees, the 1099-K says $5,000. You report $5,000 as income on Schedule C and then deduct the $500 fee as a business expense. The net result is the same, but you can't just report $4,500 and call it done.
Below the threshold? You still owe tax. The $2,500 threshold is just for when Substack is required to send you a form — it has nothing to do with when income becomes taxable. If you earned $800 in subscriptions and never got a 1099-K, the IRS still expects you to report that $800 on your return.
Free vs. paid tiers: what actually counts
Running a free newsletter costs you nothing in taxes. As long as you're not collecting subscription payments, there's no taxable income to report — regardless of how many free subscribers you have, how often you publish, or how big your audience grows.
The tax clock starts the moment you flip on paid subscriptions. Here's how the different revenue streams break down:
- Paid subscriptions (monthly or annual): Fully taxable as self-employment income. This includes monthly plans, annual plans, and any subscriber upgrades.
- Founding member tiers: Taxable. Higher-priced tiers are still subscription income — the amount per subscriber is just larger.
- Reader tips: Taxable. If a reader sends you a tip through Substack's tipping feature, that's income. It may or may not be captured on your 1099-K depending on the amount, but it's taxable either way.
- Free newsletter with no monetization: Not taxable — there's nothing to tax.
If you're debating whether to turn on paid subscriptions, just know that doing so doesn't dramatically change your tax situation unless you're actually earning meaningful revenue. The taxes scale with what you earn.
Top deductions for newsletter writers
This is where you get money back. Every dollar you spend on legitimate business expenses reduces your taxable profit — which reduces both your SE tax and income tax. Keep receipts and records. The IRS expects you to prove deductions if audited.
Substack's 10% platform fee
Deductible as a business expense on Schedule C. As explained above, the fee is taken before your payout but the gross amount is your income — so you claim the fee as a deduction. For a writer earning $20,000 in subscriptions, that's a $2,000 deduction right there.
Writing tools and software
If you pay for tools to run your newsletter, those costs are deductible. This includes:
- Notion, Obsidian, or other writing/organization apps used for your newsletter
- Grammar and editing tools (Grammarly, ProWritingAid, etc.)
- Research databases (academic journals, industry data services)
- AI writing or research tools you use to produce content
- Project management apps used exclusively for newsletter work
If you use a tool for both personal and newsletter purposes, deduct only the business-use percentage. For a tool you use 80% for your newsletter and 20% personally, deduct 80%.
Home office deduction
If you have a dedicated space in your home used regularly and exclusively for your newsletter work, you can deduct a portion of your housing costs. The IRS offers two methods:
- Simplified method: $5 per square foot of your dedicated workspace, up to 300 sq ft ($1,500 max).
- Regular method: Calculate what percentage of your home the workspace occupies, then apply that percentage to your rent, mortgage interest, utilities, and home insurance.
The key requirement is exclusive use. A desk in your living room where you also watch TV probably doesn't qualify. A dedicated home office does.
Internet: the business portion
Your monthly internet bill is partially deductible. If you estimate you use the internet 40% for business (writing, researching, publishing), deduct 40% of your annual bill. Document your reasoning in case of questions.
Research costs
Running a newsletter often requires staying informed. These costs are deductible:
- Books and ebooks related to your newsletter's topic
- Subscriptions to other newsletters, magazines, or publications you reference
- Industry reports, data subscriptions, and news services
- Conference attendance directly related to your subject matter
Podcast and video equipment
If you produce audio or video content alongside your written newsletter — a companion podcast, YouTube series, or video essays — equipment costs are deductible. This includes microphones, cameras, lighting, audio interfaces, and editing software. If the equipment is used for both business and personal purposes, deduct the business portion only.
External email tools
Some newsletter writers use tools outside Substack — ConvertKit, Mailchimp, or Beehiiv — to manage segments or cross-promote. If you're paying for external email tools as part of your newsletter business, those subscriptions are deductible.
Domain and website costs
If you own a custom domain pointing to your Substack, or run a companion website, those hosting and domain registration costs are deductible business expenses.
Hobby vs. business: If you write consistently, actively promote your newsletter, and are trying to turn a profit, the IRS treats it as a business — and you get all the deductions above. If you write occasionally with no real profit motive, the IRS may classify it as a hobby. Hobby income is still taxable, but hobby losses cannot offset other income, and many deductions are disallowed. Consistency and intent are the keys: document that you're running this like a business.
Quarterly estimated taxes
Because Substack withholds nothing, you're responsible for paying taxes throughout the year — not just in April. The IRS requires quarterly estimated payments if you expect to owe $1,000 or more in federal tax for the year from self-employment income.
The 2025 quarterly deadlines are:
- Q1 (Jan–Mar): Due April 15, 2025
- Q2 (Apr–May): Due June 16, 2025
- Q3 (Jun–Aug): Due September 15, 2025
- Q4 (Sep–Dec): Due January 15, 2026
A simple approach: after each Substack payout, move 25–30% into a separate savings account earmarked for taxes. When quarterly deadlines arrive, you'll have the money ready. Pay through the IRS Direct Pay portal or via IRS Form 1040-ES. Missing payments doesn't mean automatic penalties, but significant underpayment can trigger an underpayment penalty when you file.
Multiple Substack revenue streams
Substack has expanded beyond basic paid subscriptions. As of 2025, you may be earning income through multiple channels on the platform — and all of them are taxable:
- Monthly and annual subscriptions: Your core recurring revenue. Taxable in the year the payment is received.
- Founding member tiers: Higher-priced subscriptions for your most dedicated readers. Same tax treatment as standard subscriptions.
- Substack Notes tips: If followers tip you through Substack Notes, that's taxable income. It flows through the same Stripe payment processing and may be included in your 1099-K.
- One-time payments or group subscriptions: Any one-time payments processed through Substack are taxable in the year received.
Keep track of all these revenue sources separately in your records. When Substack and Stripe report your 1099-K, it reflects the combined gross across all payment types — so your own records help you understand the breakdown and claim the right deductions against each stream.
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