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How Do I Record Barter Income on my Business Tax Return?

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Question: How Do I Record Barter Income on my Business Tax Return?
Answer:

Recording Barter Income

Barter income is taxable to your business in the year in which it is realized (services performed or products sold). The income from bartering activity is recorded in the same way as other forms of income, on the appropriate tax return for your type of business. Record the fair market value of the product or service for which you received the income.

Income from Barter Exchange Transactions
If you are a member of a barter exchange, you will receive a 1099-B from the exchange, showing the amount of income you received during the year from bartering your products or services. You must report this income on your tax return, in addition to any other barter income you received from individual barter partners.

Other Tax Effects of Barter Income
Like other income, barter income can affect your total income tax liability, self-employment tax,excise taxes, state taxes, and employment taxes.

Recording Bartering Expenses
If you purchased products or services through barter for your business, you may be able to take a deduction for these barter expenses. For example, if you bartered your plumbing services for legal fees, you may deduct the legal fees on your business tax return. Be sure to keep good records of barter transactions to substantiate these expenses.

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