By Catherine Rudy, Mar 21 2013 4:38PM
WRITING WRITING OFF AS A TAX DEDUCTION
So you call yourself a writer. When you meet people, you might even introduce yourself as one, even though the way you support yourself is from your job as a bookkeeper, delivery person, or receptionist. After all, telling people you are a writer gives you a different dimension. At The Wolf Pirate Project, we look at you as an artist. However, in the practical sense, you should consider your writing as a business. The Internal Revenue Service gives you the right to deduct business expenses on your income tax. If you itemize your deductions, it would behoove you to take advantage of the business deductions as a writer.
The IRS states that you can deduct expenses for a business or trade if you intend that business or trade to produce a profit. So, if you intend to sell your work to a publisher or the public, your writing endeavor qualifies for the business deduction. If you only write for a hobby and don’t intend to peddle your work to publishers or have it self-published for sale to the public, you cannot take the deduction. Submission records and response slips from publishers would be the proof of the difference between these two endeavors. Be forewarned, though, the IRS will question whether your writing business is a for-profit endeavor if you do not turn a profit for three out of five consecutive years. This is a difficult pill to swallow, since many writers can tell you how disappointing sales are for their work. It is not a simple matter of selling your work at a craft show or distributing it to local bookstores. There are obstacles standing in your way. There are other factors you can use to prove you intend to make a profit with your writing rather than doing it as a hobby. Some of those include how you run the business, your expertise in your field, the amount of time you put into your business, previous profits, whether writing is your sole source of income, and if it is a type of activity that can be considered recreational or a hobby.
Diligent record keeping is the key to successful itemizing. Store your receipts and correspondence, including all those dreaded rejection letters. Staple them to a copy of the query letter you sent out so the form rejection letters have some validity. Keep your manuscript and business files on a separate flash drive that has no other personal files on it. If you have a home office, be careful not to share it with the personal aspect of your home life. The IRS is very particular about what they consider a home office used for business. You shouldn’t consider this a drawback, though. If you intend for your writing to be viewed as a business, then treat it like a business. Yes, writing is a creative function and there’s no reason why you can’t get enjoyment out of it, even as a business; but there is another side to writing than contributing art to humanity. There is the ugly business side of it, the angle where you have to sell of your life’s work to keep afloat or feed your family. Easier said than done.
In the meantime, if you intend your work to become published and make it onto a store shelf, take advantage of the business deductions. There are many costs you can write off, including ink for your printer, paper, stationary, postage, reference books, and computer hardware and software. In some instances, a computer is taken at a depreciated value. Check with your accountant or a qualified tax preparer for how this is done. The use of your car may also be deductible; however, you must determine what percentage of use you use the car for your business against its personal use and deduct only that percentage. Keep records on mileage to and from business-related trips. If you attend book fairs to sell your printed book, you may deduct the cost of space and certain items related to the trip. IRS Publication 535, Business Expenses gives a complete account of what costs you can deduct for a business.
If you have space in your home set aside for your writing, you might be able to deduct part of your home’s utilities, insurance, mortgage interest, repairs, and depreciation. However, the IRS is particular about what qualifies as a business office in your home. For one, the space must be exclusively dedicated to your business. You cannot share the space with personal or home activities. Secondly, the home office must be your primary place for doing business, even if you work outside the office. If you satisfy these two rules, you may deduct the same percentage off your utilities, insurance, mortgage interest, repairs, and depreciation as your home office is of your entire house. For example, if your spare bedroom is your exclusive business office and it is 200 square feet and your home is 2,000 square feet, you can deduct ten percent of the aforementioned items as a business expense. But, be forewarned, this deduction is applied only if you show a profit for the year. For more information, you can read IRS Publication 537, Business Use of Your Home.
On the surface, it may look appealing to deduct the cost of writing as a business expense, but please be aware of the rules to avoid future trouble with an audit. If you sell periodic articles, do freelance writing, or publish through any means that reaps financial rewards, it might be in your best interest to itemize your expenses. The IRS requires that you report earnings on your writing endeavors; it only seems fair that you should deduct the expenses required to make those earnings possible.
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