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Domain Tax Strategy: Sell Domain Names This Year


When possible, I generally like to defer big end of the year sales to the following year for tax purposes. I am not a tax expert or even a fake tax expert, but I liked the idea of not having to pay taxes on a sale until the following year, so I always just assumed it was better to move a large November/December deal to January.

I read an article posted on Sedo and written by noted CPA and domain tax expert Sandra Brooks, author of the Domain Tax Guide (affiliate link). One very interesting nugget stands out from the article that was surprising to me, and it may change the closing date of a sale I have pending.

According to Brooks,

"Your best strategy may be to presume that the rates will go up, especially if you are in a higher tax bracket. You should lean toward selling domains now versus next year if the terms otherwise make sense. You may also want to defer deductions as they will become more valuable if the tax rates increase."

As with all tax guidance and advice, it's always best to speak with your own accountant who → Read More

Be Prepared for Tax Time


It's only February 12, but I am already thinking about tax time in just a couple of months.   I am not a finance or numbers guy, so I use an accountant to file my taxes, although I keep very good records of sales, expenses and other transactions.

One thing that made my life easier a couple of years ago was Sandy Brooks' Domain Tax Guide. When I first explained to my accountant what I did as a hobby, he understood it, but I don't think he knew anything about it.   At the time, I had made about $1,000 in profit, so it really didn't matter at all.

As my income continued to rise, the tax impact did as well.   A couple of years ago, when domain revenue became a significant income stream for me, I sent him a copy of the Domain Tax Guide and asked him to read it and use it as a reference when doing my taxes.   If you are making a few thousand dollars or more, you should know the advantages and disadvantages of doing things certain ways.

A few things I think are important that are discussed in the Domain Tax Guide include:

Domain Tax Tip


I should preface this post by saying I am not anything close to a tax expert, and in fact, I received a D in Financial Accounting in college (granted I was pledging a fraternity). Nevertheless, I want to talk about taxes with regards to your domain business. I know it's barely September, but if there are things you can do to lessen your tax burden before the end of the fiscal year, now is the time to do it.

The tax problem I generally have with my business is that I frequently spend quite a bit on acquisitions after a big domain sale, and taxes are an after thought.   For example, after selling a domain name for $80,000 and making a $40,000 profit, I am often inclined to go out and buy a $70,000 domain name.   However, assuming a 35% tax rate (state and federal combined), I would owe the government $14,000, leaving me with $66,000.   Since taxes aren't taken out at the time of the sale, I might feel safe spending $70,000, but if I develop the new name, I have to come up with the extra $4,000.

That said, there are ways to → Read More