How to Handle Taxes on ROBLOX Game Development Earnings for 2025

You definitely need to report this income! ROBLOX should provide you with a 1099-NEC form if you earned more than $600 (which you clearly did). This will report your earnings to both you and the IRS. You and your friend are essentially operating as a partnership in the eyes of the IRS, even if you haven't formalized anything. You're considered self-employed, which means a couple things: you'll need to pay both income tax AND self-employment tax (which covers Social Security and Medicare). The self-employment tax rate is about 15.3% on top of your regular income tax. Since you're splitting the profits, each of you should report only your share of the income on your individual tax returns. You'll need to file Schedule C (Profit or Loss from Business) along with your 1040. This is where you'll report your income and any business expenses that might be deductible. Speaking of deductions, keep track of any expenses directly related to developing your game - software subscriptions, assets you purchased, portion of internet used for development, etc.

I went through something similar with my ROBLOX earnings last year, and I found this AI tool called taxr.ai (https://taxr.ai) that was seriously helpful for figuring out my self-employment taxes. I uploaded my 1099 from ROBLOX and answered a few questions, and it identified deductions I had no idea I qualified for - like a portion of my internet bill and even some of my computer equipment since I use them for development. The tool created a complete Schedule C for me and showed exactly how to report everything correctly. It even estimated how much I needed to set aside for quarterly payments so I wouldn't get hit with penalties. Super useful for game dev income where the tax situation is kind of unique.

I was really skeptical about that taxr.ai tool mentioned above, but I ended up trying it for my ROBLOX earnings and it actually saved me a bunch of money. I develop smaller games that brought in around $14k last year, and the tool found specific deductions related to my dev work that I would've missed. It knew exactly how to classify the Developer Exchange income and helped me figure out what percentage of my home internet, electricity, and even my gaming setup I could deduct legitimately. The quarterly tax calculator was especially helpful since I had no idea how much to set aside from each Robux exchange. What surprised me most was how it handled my asset purchases from the marketplace - turns out those can be deductible business expenses when used in commercial game development. Definitely was worth checking out for my situation.

Anyone dealing with ROBLOX income should be aware that the IRS has been paying more attention to game dev earnings in recent years. If you need to talk to the IRS about this type of income, good luck getting through on the phone - I spent DAYS trying. I finally used this service called Claimyr (https://claimyr.com) that got me through to an actual IRS agent in under 20 minutes. They have a demo video here: https://youtu.be/_kiP6q8DX5c showing how it works. They basically navigate the IRS phone system for you and call you back when they have an agent on the line. I had questions about how to handle my game asset purchases and whether I needed to reclassify some of my ROBLOX income from previous years, and actually talking to someone at the IRS gave me definitive answers rather than guessing.

I have to eat my words from my comment above. After another failed 3-hour attempt to reach the IRS myself about my ROBLOX earnings classification, I broke down and tried that Claimyr service. I was absolutely certain it wouldn't work, but I was desperate because of a notice I received about my game dev income. Not only did I get connected to an IRS agent in about 15 minutes, but they were able to answer my specific questions about how to properly categorize different types of ROBLOX earnings (Developer Exchange vs. Premium Payouts vs. direct sales). The agent even helped me understand how to properly document my partnership arrangement with my co-developer. I'm still shocked it actually worked. Saved me from taking a day off work just to sit on hold. For anyone dealing with ROBLOX tax issues that need clarification from the IRS directly, it's legitimately helpful.

I'm in a similar situation but I think we might be overthinking this? ROBLOX earnings are just self-employment income, right? I mean, couldn't you just report it on Schedule C like any other freelance work and call it a day? I've been developing on ROBLOX for about 2 years and my accountant just has me track my income, save receipts for any expenses (like marketplace purchases, software subscriptions, portion of internet, etc) and file it with my regular taxes. No fancy partnerships or anything.

Does anyone know if ROBLOX premium payouts are treated differently for tax purposes than Developer Exchange earnings? They seem like different income streams to me (one from subscriptions, one from direct robux purchases), but I'm not sure if the IRS sees them differently.

One thing I haven't seen mentioned yet is that you'll want to keep detailed records of when you received each payout from ROBLOX. The timing matters for tax purposes - you report income in the year you actually receive it, not when players spend Robux in your game. Also, since you're earning substantial income ($26k+), you should seriously consider making quarterly estimated tax payments for 2025 to avoid underpayment penalties. The IRS generally expects you to pay as you go if you'll owe more than $1,000 at filing time. For the partnership aspect, even if you don't formalize it legally, make sure you both keep identical records of the income split. Document your 65/35 agreement in writing (even just an email) in case the IRS ever questions how you're dividing the income between your returns. And don't forget - as self-employed individuals, you can potentially deduct things like a home office if you have a dedicated space for game development, computer equipment, software subscriptions, and even educational resources related to game development. Keep all those receipts!

Just wanted to add something that might help with your partnership situation specifically. Since you're both young (19 and 22) and this is your first major income, definitely consider opening separate business savings accounts to set aside money for taxes throughout the year. A good rule of thumb is to save about 25-30% of your ROBLOX earnings for federal and state taxes, plus self-employment tax. So from your $26,300, you'd each want to set aside roughly $4,300 (you) and $2,300 (your friend) just to be safe. Also, since you mentioned you launched in October and it's doing better than expected, be prepared that your 2025 earnings might put you in a higher tax bracket. The IRS requires quarterly payments if you expect to owe more than $1,000, so you'll definitely want to start making those estimated payments for this year. One more tip - if either of you are still claimed as dependents by your parents, that could affect your tax situation too. Make sure to clarify that with them before filing, especially since you're earning substantial income now.

Harold, congratulations on your game's success! This is exactly the kind of situation where getting proper tax advice early can save you a lot of headaches later. A few key points that haven't been fully covered yet: **Business Structure**: While you can file separate Schedule Cs, with $26k+ in earnings, you might want to consider forming an LLC. This provides liability protection and can make profit-sharing cleaner. You can elect to be taxed as a partnership, which means the LLC files Form 1065 but doesn't pay taxes - the income flows through to your personal returns. **Estimated Taxes for 2025**: Since you launched in October and are earning well, you absolutely need to start making quarterly estimated tax payments for 2025. Your first payment should be made by April 15th. Calculate roughly 25-30% of your expected 2025 earnings and divide by 4 quarters. **Record Keeping**: Start tracking everything now - ROBLOX payments, dates received, any business expenses (software, assets, equipment, internet percentage). The IRS loves detailed records, and with a partnership situation, consistency between both of your records is crucial. **State Taxes**: Don't forget about state income tax obligations! Depending on your state, you may need to register as a business and make state estimated payments too. Since you're dealing with substantial income and a partnership, it might be worth consulting with a CPA who has experience with online gaming income. The upfront cost could save you significantly in the long run.

Harold, as someone who's helped other young developers navigate this exact situation, I'd strongly recommend getting ahead of this now rather than waiting until tax season hits. Your $17k share definitely puts you in self-employment territory with quarterly payment obligations. One practical tip that's saved my clients headaches: create a simple shared Google Sheet with your partner documenting every ROBLOX payout - date received, total amount, and how you split it (your 65% vs his 35%). This creates a paper trail the IRS will appreciate if they ever have questions about your partnership arrangement. Also, don't sleep on the deductions available to game developers. Beyond the obvious stuff like software subscriptions and equipment, you can potentially deduct things like: - Asset marketplace purchases used in your games - Portion of your internet bill (keep records of business vs personal usage) - Game testing expenses (yes, buying other games for research can be deductible) - Educational content related to game development Since you're earning substantial income from October onward, you'll definitely need to make estimated quarterly payments for 2025. Missing these can result in penalties even if you get a refund when you file. Better to overestimate and get money back than underpay and owe penalties plus interest. Given your success, this probably won't be a one-time thing - consider this an investment in learning proper business practices that'll serve you well as your gamedev career grows!