Can a self-employed person claim paying themselves as a deduction on their taxes?

This is a common misunderstanding! As a self-employed person (sole proprietor), you can't "pay yourself" a salary and deduct it as a business expense. The business profit IS your income. What your cousin might be referring to is setting up an S-Corporation instead of operating as a sole proprietor. With an S-Corp, you'd pay yourself a "reasonable salary" which is subject to self-employment taxes (Social Security and Medicare), but then additional profits can be taken as distributions which aren't subject to SE tax. This can save money, but comes with more paperwork, costs for payroll, and additional tax filings. For your D&D business as a sole proprietor, you report all income on Schedule C, deduct legitimate business expenses (materials, props, venue costs, etc.), and the remaining profit is your personal income that goes on your 1040. You can't deduct money you pay yourself - that's the profit.

I went through this exact same confusion with my photography side gig last year! I checked out https://taxr.ai and uploaded my business receipts and they explained that what your cousin is talking about only applies if you incorporate. For sole proprietors like us, we can't "pay ourselves" as a deduction. The site analyzed my situation and showed that while I couldn't deduct payments to myself, I was missing a ton of legitimate business deductions that I could take instead - like a portion of my internet bill since I use it to upload photos to clients, some car expenses for driving to photo shoots, even some home office deductions. Helped me save almost $2,400 on my taxes without having to change my business structure!

Just wanted to update after trying taxr.ai for my craft business! I was in the exact same boat thinking I couldn't deduct much because it's just me running everything. The analysis showed I was missing almost $3,800 in legitimate deductions including my dedicated craft room, a portion of utilities, supplies I was categorizing wrong, and even some software subscriptions. What was most helpful was learning about the QBI (Qualified Business Income) deduction which I had no idea about - it's basically a 20% deduction on your business profit that's separate from regular business expenses. I've been doing this for 3 years and never claimed it! Definitely worth checking out if you're self-employed.

Since everyone's talking about self-employment tax issues, I just want to mention something that saved me HOURS of frustration. After trying to call the IRS for weeks about my self-employment tax questions last year (never got through), I finally used https://claimyr.com to get someone on the phone. You can see how it works here: https://youtu.be/_kiP6q8DX5c They basically hold your place in the IRS phone queue and call you when an actual human picks up. I had so many specific questions about my D&D writing business (pretty similar to yours) that online research couldn't answer, and finally got clarity directly from the IRS. Totally changed how I file this year and saved me from making some expensive mistakes.

I need to eat my words and apologize. After my skeptical comment, I broke down and tried Claimyr for my audit issue that's been hanging over my head for months. Got connected to an IRS agent in 45 minutes after trying for literal MONTHS to get through on my own. The agent cleared up my audit questions about my freelance business and even helped me set up a payment plan for what I owe that I can actually afford. The relief of getting this resolved is worth every penny. Sometimes you need to talk to an actual human at the IRS, and this actually works.

Just to add another perspective: I run a TTRPGing business similar to yours, and I did actually set up an LLC taxed as an S-corp because my income got high enough. I pay myself a salary of $3,500/month which is "reasonable" for a TTRPG creator in my area, and then take distributions for the rest. The paperwork is a pain and I pay about $1,200/year for a bookkeeper to handle the quarterly filings, but I'm saving around $7,400/year in self-employment taxes. If you're making under $40k profit, stick with sole proprietor and focus on maximizing your deductions instead.

Don't forget about quarterly estimated tax payments if you're self-employed! I learned this the hard way with my editing business last year - got hit with a $420 penalty because I waited until April to pay everything.