How Do I Categorize My Photography Expenses?

By Ray Baker

If you’re like most photographers I meet, you probably feel like you’re working hard but not seeing much profit. PPA research shows that, on average, photographers in the United States keep only about 20% of their total income after expenses [1]. The rest goes to gear, software, insurance, studio rent and dozens of other costs. That’s why ‘how do i categorize my photography expenses’ isn’t just a tax-time chore. It’s the fastest way to spot where your money is really going and start keeping more of it.

How Do I Categorize My Photography Expenses?

The short answer to ‘how do i categorize my photography expenses’ is: group every business cost into one of six general expense buckets that PPA recommends, administration, building, employee, marketing, depreciation and owner’s compensation, and track cost of sales separately. This gives you a clear P&L view and shows exactly where to trim or invest.

Key takeaways

• PPA recommends six general expense categories plus cost of sales tracked separately. [2]
• Managerial accounting shows the “why” behind your numbers, not just the “what” for tax time. [3]
• Tracking cost of sales separately from general expenses is essential for pricing profitably. [2][4]
• Home studio and vehicle costs can be partially deducted if you keep clear records. [5][6]
• Review your categories quarterly to adjust before small leaks become large losses. [4][3]

What Are the Main Expense Categories?

When I sit down with a photographer to sort out their numbers, I start with the buckets the Professional Photographers of America (PPA) recommends in its business resources [2]. These aren’t just for tax time; they’re designed to help you run a more profitable studio. PPA lists six general expense categories:

• Administration Expense: accounting and legal fees, auto expense, education, consumer interest, office supplies, props and accessories, telephone. [2]
• Building Expense: building maintenance, real estate taxes, rent or mortgage interest, utilities, insurance. [2]
• Employee Expense: salaries and benefits. [2]
• Marketing Expense: advertising and promotion. [2]
• Depreciation Expense: capital expenditures over $500. [2]
• Owner’s Compensation: the salary and benefits you pay yourself. [2]

Cost of sales (COS), also known as cost of goods sold, sits outside those six. It covers the time and materials that go into making the products you sell: frames, paper, retouching, printing, production contractors. PPA’s benchmark for COS is 25% of total sales, meaning you should spend no more than one quarter of your total sales on the cost of producing your products [2].

When a photographer asks me ‘how do i categorize my photography expenses’, I point them to these buckets first. Your Adobe subscription fits under administration; a new lens over $500 goes under depreciation [2]. The key is consistency. Stick with your buckets so you can compare month to month.

If you’re still building your business, getting the structure right early saves headaches. I’ve written about how to start a photography business with practical steps that make ongoing expense tracking simpler.

Why Use Managerial Accounting?

I’ve seen too many photographers rely on their tax preparer’s summary and wonder why they’re not getting ahead. The trouble is, tax categories are built for the tax office, not for running a business. As PPA points out, tax accounting records are not in a form that can provide you with info on how to manage your photography business successfully [3].

Managerial accounting, on the other hand, is a way of arranging your numbers so you can easily categorise expenses and compare them directly with recommended benchmarks [2]. It helps you understand the “why” behind your spending, instead of just the “what”. The process can be broken into four steps: list your sales by product line, track your cost of sales, track your general expenses, and calculate your owner’s compensation plus net profit [3]. If you’re stuck on ‘how do i categorize my photography expenses’, this is the framework that makes it clear.

You’ll quickly see strengths and weaknesses. PPA publishes benchmarks for cost of sales, general expenses and net profit as percentages of total sales [2]. Without managerial accounting, those numbers stay buried in a tax line item.

Cost of Sales vs General Expenses

The split between cost of sales and general expenses matters more than many photographers realise. Your cost of sales includes everything that goes directly into delivering a product to a client: the print, post-production charges, packaging, and shipping [4]. If you hire a second shooter for a wedding, their fee is a cost of sale. If you pay a retoucher per image, that’s COS too.

General expenses are the fixed costs that stay the same whether you sell ten packages or none. Studio rent, insurance, software subscriptions, and your website hosting are all general expenses [2]. PPA publishes a benchmark for general expenses as a percentage of total sales, so you can see if your overhead is in line with the target [2].

This is where ‘how do i categorize my photography expenses’ really pays off. I recommend setting up your spreadsheet or accounting software with these two big groups first, then breaking them into the subcategories I listed earlier. The tax office doesn’t require this split, but your pricing decisions do. If you haven’t yet worked out what your photography really costs, read my article on photography business expenses before you set another price.

5 Easy Tips to Categorise Your Expenses

Over the years, I’ve settled on a few habits that make expense categorising feel less like a chore and more like a quick health check. If you’re still wondering ‘how do i categorize my photography expenses’, these five tips will get you started.

1. Open a separate business bank account. Run every business transaction through it. This cuts categorising time because you’re not mixing personal and business expenses. Bank fees are deductible [5].
2. Use a simple spreadsheet or bookkeeping software from day one. A sheet with columns for date, vendor, amount, category, and notes takes five minutes a week. PPA suggests this approach [6].
3. Assign every expense to a PPA bucket and avoid a “miscellaneous” catch-all. If something doesn’t fit, create a small “other” bucket but review it monthly.
4. Record vehicle and home studio costs with clear notes on business-use percentage. Log business miles right after each trip. For your home studio, measure the square footage and keep utility bills. The space must be used exclusively for business [5].
5. Review your categories monthly against PPA benchmarks. Set a 30-minute appointment with yourself to pull a simple profit and loss statement. Look for categories that are creeping up and ask why. Managerial accounting helps you steer forward [3].

What About Home Studio and Vehicle Costs?

If you operate a home studio, you may claim a portion of housing costs. The space must be used exclusively for business, but doesn’t need a separate room [5]. Calculate the percentage based on square footage, then apply it to rent, mortgage interest, utilities, internet, insurance, and repairs [5][6].

I keep a folder with my lease, a floor plan, and utility bills. At tax time, I’m not scrambling. If you rent a separate studio, the full cost is deductible. Simpler, but a larger expense.

Vehicle costs work similarly. Business driving for sessions, scouting, and client meetings is deductible. Track actual expenses or use the standard mileage rate. The key is a contemporaneous log. I keep a notebook in the glovebox and write the date, destination, and odometer reading. It takes seconds and removes guesswork [5][6].

If you’re curious how these deductions affect real photographer income across different niches, I’ve broken it down in my article on how much photographers make.

How Often Should I Review Categories?

I recommend a quick monthly review and a deeper quarterly sit-down. By then you’ll have enough data to spot trends without waiting so long that a small overspend becomes a large problem. A profit and loss statement, which summarises revenues, costs, and expenses over a period, is your best tool here [4].

Compare your current P&L to the same period last year and to the PPA benchmarks. If your cost of sales has crept above 25% of total sales, ask why [2]. Are you offering more products? Did paper prices rise? Did you start including a premium album that isn’t priced into your packages? These are the conversations that lead to better decisions.

When sales slow, this discipline becomes even more valuable. Knowing exactly where your money goes means you can trim intelligently instead of cutting across the board. If you’ve been wondering ‘how do i categorize my photography expenses’, I hope this framework helps. I’ve written about what to do when photography sales dry up, and expense tracking is always step one.

Frequently asked questions

Can I deduct my camera gear all at once or should I depreciate it?

You can deduct the full cost in the purchase year, or depreciate over several years. Ask your tax advisor which suits your situation. [5][6]

What if I use my personal phone for business?

Deduct the business-use percentage of your phone bill. Keep a log or estimate honestly, and note the business purpose for each call. [5][6]

Are meals with clients fully deductible?

In the US, you can deduct 50% of meals with clients. Keep the receipt and note the business purpose. Rules vary elsewhere, so check locally. [6]

Do I need to issue a 1099 to assistants I hire?

In the US, if you pay an assistant $600 or more, issue them a 1099. This also applies to equipment rentals from individuals. [6]

How do I categorise expenses for a home studio I use only part-time?

Deduct only the portion of your home used exclusively for business. Calculate the square footage percentage and apply it to rent, utilities and insurance. [5]

What’s the difference between cost of sales and general expenses?

Cost of sales covers direct production costs like prints. General expenses are fixed overheads like rent. Separating them shows if pricing covers production and leaves profit. [2][4]

Honest take

I won’t pretend categorising expenses is exciting. But if you’ve been asking ‘how do i categorize my photography expenses’, I hope this gives you a clear path. Photographers who spend an hour a month organising their numbers stop wondering where the money went and start building a business that pays them. It’s about consistency. Clear categories lead to better decisions with less stress.

References

1. Professional Photographers of America. Photography Pricing 101: How to Charge for Your Work. October 4, 2024. https://www.ppa.com/articles/what-should-i-charge-photography-pricing-101
2. Professional Photographers of America. PPA Business Resources. https://www.ppa.com/benefits/business-resources
3. Professional Photographers of America. Track Photography Business Expenses and Profit. PPMag. https://www.ppa.com/ppmag/articles/find-out-where-your-money-goes-by-calculating-business-expenses
4. Professional Photographers of America. Know Your Numbers: How to Keep Your Photography Business Profitable. https://www.ppa.com/articles/know-your-numbers-how-to-keep-your-photography-business-profitable
5. Professional Photographers of America. Last-Minute Deductions. PPMag. https://www.ppa.com/ppmag/articles/last-minute-deductions
6. Professional Photographers of America. Navigating the Business Side of Photography: How to Handle Tax Season. https://www.ppa.com/articles/navigating-the-business-side-of-photography-how-to-handle-tax-season

Shoot well and follow up faster,
Ray Baker