How To Make Money Playing Video Games On Twitch

make money playing video games Making money by playing your favorite video games sounds too good to be true. It may not be quite as unrealistic as receiving an inheritance from a Nigerian prince, but making money from playing video games does sound a little far-fetched.

Your parents repeatedly told you so while you spent hours leveling up on weekends. As they pointed out when you were a kid, no one is going to pay you to play video games. Turns out Mom and Dad were wrong.

You can make money playing video games on the streaming platform Twitch. Showcasing your skills and entertaining commentary on Twitch can earn you some nice cash. You just need the right tools and some determination to turn your passion for playing into a lucrative and fun side hustle.

Here's what you need to know about making money playing video games, and about how best to manage your video game earnings:

Make Money Playing Video Games on Twitch

Twitch is the most popular platform for gamers looking to earn money from their hobby. This Amazon-affiliated streaming platform allows gamers to broadcast their games.

Twitch is free to sign up, and once you have downloaded some Twitch-compatible broadcasting software, you'll be ready to share your gaming with the world.

However, if you want your viewers to see and hear you while you play (rather than just watch your screen), you'll need video capture equipment and a microphone. These are important because streamers who stand out from the crowd–through their witty comments during gameplay, dashing good looks, or ability to make hilarious reaction faces–get more views.

So how easy is it to make money on Twitch? According to streamer Rebecca "MimikoBaker" Sites,

"this definitely isn't a side hustle where you make money right away or consistently. Unless you've already formed and audience somewhere else and are bringing them over, you'll be starting from scratch and building an audience slowly. Focus more on building an audience or a brand that's uniquely yours and on setting the foundation for your long-term goals."

That said, there are a number of different income streams you can access on Twitch, even when you are just starting out.

Twitch Income Streams

Once you've signed up, you can immediately add a donation button to your channel. With the donation button, viewers who like your channel can send money your way. Donations can be as low as $1 but can be as high as the viewer likes. Donations are the first level of earning money via Twitch.

However, before you can start earning in other ways, you will need to put in some real gaming time. That's because you will need to have hundreds of gaming hours under your belt to become eligible to be a Twitch Affiliate. Current Affiliate eligibility requires the following:

500 total minutes of broadcasting in the previous 30 days
At least 7 unique broadcast days in the previous 30 days
3 concurrent viewers or more over the previous 30 days
At least 50 followers

When you become eligible for Twitch Affiliate, you will receive an email notification inviting you to join. Then, you will have to sign up with a payment method, and you'll be ready to start earning the big bucks.

The first additional payment source are "Bits." You begin to collect "Bits" from viewers through a tipping process called "Cheering." Viewers earn anywhere from 5 to 100 Bits when they watch 30-second ads, or they can purchase Bits outright through the Amazon payment system. The cost for viewers to buy Bits starts at $1.40 per 100 Bits, although the price-per-bit goes down with bulk purchases.

When a viewer likes something you've done, they can cheer you by typing "CheerXX" into the chat bar of your streaming channel, where XX is the number of Bits they want to give you. So if they type "Cheer1000," you'll receive 1,000 Bits, which is worth $10.

Income Streams for Twitch Partners

Once you have a regular viewership of 500 or more, you can apply to become a Twitch Partner. It's free to apply, and once you are approved, you can add a "Subscribe" button to your channel. Viewers who subscribe can pay $4.99, $9.99, or $24.99 per month. You receive half of the subscription price, and viewers get to watch ad-free and receive access to custom emojis. Subscriptions offer a win-win for avid viewers and Twitch streamers.

As a Partner, you can also begin to include affiliate links to the gear you use in your channel. These affiliate links, which take the viewer to Amazon, will earn you a small commission every time one of your viewers makes a purchase using the link.

Once you have become a Twitch Partner, you also get to share in ad revenue. There are pre-roll ads before each Twitch stream, similar to the ads you find before YouTube videos. Twitch Ad revenue for partners averages about $250 per 100 subscribers. Partners can also create and sell merchandise in the Twitch Merch store.

Finally, streamers who reach the top tier of subscriber numbers will often receive sponsorship deals. These kinds of deals could include anything from sponsored play of new games to sponsored attendance at live gaming events.

Other Income Streams

In addition to the income options available via Twitch, there are several other ways to monetize your gaming. These include:

YouTube: In addition to streaming on Twitch, you can also upload gaming videos to YouTube. There are a number of ways to monetize your content on YouTube, including through ad revenue or YouTube Fan Funding.
Patreon: This platform allows fans to pay creators for their work. Patreon creators set up tiers of perks for fans who pay a monthly amount. The perks increase at each dollar level. This lets super fans who are spending the most per month get the sweetest perks. These kinds of perks can include exclusive content, early access to work, or even a membership-only video channel.
Merchandise: Even if you have not yet become a Twitch Partner, you can always create and sell merchandise related to your channel via sites like DesignedByHumans, Teespring, or RedBubble.

Twitch streamer Wild4Games explains the myriad ways even newbie streamers can make money via Twitch in this video:

Managing Your Video Game Income

Making it rain by playing video games may be your main concern. But it is important to think about how you will manage your money once it starts coming in. Since you are doing something you love, you may feel tempted to think of your income as free money. But income is income, no matter how you earn it, so it's important to set up some good financial habits when you're still a newbie streamer.

This is especially important in content creation, where it's tempting to use all of your income to invest in the latest technology. MimikoBaker explains:

"There's a lot of amazing pieces of technology that can really help with the quality or ease of streaming but they definitely come at a premium price for those who are starting out. For example, I have an incredibly nice retractable green screen now that I love, but previously I had made my own cheaply out of pipe and drape, and when I started out I didn't even use a green screen at all. Having multiple monitors, specialty lighting, or a stylistically pleasing headset or keyboard are all nice but the cost can add up quite quickly."

Here's what you need to do to make sure you manage your money wisely:

Budgeting Irregular Income

Whether you're using your streaming money as a supplement to a traditional job or you are trying to make a full-time living on side hustles, it's important to create a budget for your up-and-down income. This can keep you from lurching between feast and famine as your income fluctuates.

The goal of budgeting irregular income is to create a steady "paycheck" that you pay yourself. To do this, you can start by capturing extra income–that is, money that comes in that you don't need for paying your bills. This is easier when you are just starting as a streamer, since all of your income feels "extra," although it does take discipline.

When you start receiving money for your gaming, open a high-yield savings account to stash it in. Keep building up that account as you continue to earn.

See Also: The Best High Yield Online Savings Accounts

This savings account will be where your monthly "paycheck" comes from. After you have built the account over several months, you can start automatically transferring the amount you need for regular monthly spending into your checking account. This system ensures that you have the money you need each month, even if you have low-income months.

If this kind of budgeting sounds like less fun than a root canal, not to worry. The budgeting platform YNAB can help you to smooth out your irregular income in this way without it feeling like torture.

Further reading: Four Rules to Budget By from YNAB

Tax Considerations

Everything you earn through streaming is considered income, even if it originated from one of Twitch's handy-dandy donation buttons. (Donation is just the word Twitch uses. You are not a charity, so any donation is income).

This means you will owe income taxes on all the money you make with your gaming side hustle. That's because Twitch (and the other platforms) will not withhold taxes from your payments. In addition, you will also have to pay quarterly estimated taxes on your gaming income, since you are essentially self-employed as a gamer. The income threshold for owing taxes on your earnings is $400. If you earn less than that in a year, you will not owe taxes on your earnings.

See also: Am I Required to Make Estimated Tax Payments on Extra Income?

Quarterly estimated taxes are due on the following dates:

April 15 (July 15th for 2020)
June 15 (may change for 2020)
September 15
January 15 (of the next year)

What if those dates fall on a weekend or holiday? In that case, your quarterly tax payment needs to be made by the next business day.

Pro tip: In order to ensure that you have money set aside to pay your quarterly tax bill, it's smart to put aside 30% of all of your gaming income into a separate savings account. That way you will have the money available when it's time to pay Uncle Sam.

TurboTax can be a great help to any streamer who is worried about dealing with their self-employment income. In particular, the TurboTax Self-Employed software was designed to help side-hustlers (including streamers) with year-round service through QuickBooks Self-Employed. This will help you keep track of the various income and expenses (see below) related to your self-employment.

Further reading: Turbo Tax Review: Get Your Best Tax Return in 2019

The good tax news is that you can deduct your business expenses as a streamer. These include video games you purchased to play on stream, capture cards, and computer programs that you had to purchase to stream.

Bookkeeping for Content Creators

If you have only ever worked traditional jobs, you may be surprised to learn how complex your bookkeeping can be as a content creator. That's because you're no longer going to receive a single W-2 form that you use to file your taxes. Instead, you will receive 1099-MISC documents if you have earned $600 or more in the previous tax year.

Here's where it gets confusing, however. If you use PayPal to receive your Twitch payments, you may not get a 1099 form (1099-K in this case).

That's because PayPal is considered a merchant service account (like a credit card processor.) Paypal, therefore, has different rules about what triggers a 1099-K form. You will not receive a 1099-K from PayPal unless you have earned $20,000+ in the previous year and/or processed 200+ individual transactions. But even though PayPal won't send you a 1099-K if you make less than $20,000, you still have to claim that income to the IRS.

So it's important to make sure you keep careful track of your income. If you are still a small-time streamer who has not reached the Affiliate or Partner stage with Twitch, it will be entirely up to you to track your income throughout the year. It's a good idea to set aside time at the end of each month to record your earnings for that month. This will make bookkeeping and taxes much easier on yourself–and unfortunately, no one else will be tracking this information for you.

However, if you are a Twitch Affiliate or Partner, the platform tracks your payout history for you via the Payout Dashboard.

You can even download your payout information from the dashboard into an Excel spreadsheet. That can help you keep track throughout the year. You can import your Excel information into QuickBooks Online for one of the best DIY bookkeeping experiences.

If you know that promising to do your own bookkeeping is a lie–just like the cake–then you can offload this task onto Bench. This service assigns you a dedicated bookkeeping team. They will make sure your finances are neat and tidy and that you're ready for tax season each year.

Further reading: Small Business Bookkeeping is a Breeze with Bench

Enjoying Your Gaming Gains

Making money doing what you love may sound like a dream, but it's entirely possible in the modern world. But just having passion and hustle may not be enough. It's also important to manage your money well. That includes knowing what to expect from this new world of paid content creation. You also need to know which tools will best help you handle your money.

After all, becoming a paid gamer should be about fun–not about stressing over money management.

Have you made money as a gamer on Twitch or another streaming service? Tell us about your experience in the comments!

How to Make Money Playing Video Games--and Manage Your Earnings!

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