So, I know the answer to this, but my husband, who is doing our taxes*, would like a second opinion.
- As a writer, the books that I buy are a business expense because they are necessary for staying current with my field.
- As an audiobook narrator, the audiobooks I listen to are a business expense because they are necessary for staying current in my field.
Anyone want to flash their credentials and explain that it’s totally okay?
For early-career writers who might not be thinking about this stuff yet, remember that writing is a business. You can deduct office supplies, research tools, home electronics, website creation and maintenance costs, promotional materials, travel, food, gifts, fees for services, self-publishing and print-on-demand costs, trademarks and copyrights, domain name expenses, costs of book-launch or book-signing events, advertising, marketing and promotion, vehicle expenses, postage, bank charges and outside services.
I mean, definitely talk to an accountant, instead of just asking for advice on the internet, the way I’m doing. Just don’t assume that because you enjoy something, it is somehow not part of your job.
*Best part of marital agreement. I don’t have to touch the taxes.
Thank you for the list! As someone who is just starting out, you made me realise there may be many things I hadn’t thought of that are deductible. Of course, I’ll check the rules in the UK as they may be different but thanks for the prompt!
I’ve been wondering about that in reference to being a book buyer for a bookstore. I should check into that.
I’m having what Rob’s having.
Luckily, I’ve had an LLC for several years, so I’m on top of this (though NOT, I repeat, NOT, an attorney or CPA).
The question as it pertains to taxes is whether your writing is a “hobby” or a “business.” As a new writer, I choose not to take the deductions I *could* until I have a sale. This is my choice, and I am pretty conservative when it comes to taxes. I have no intention of attracting the IRS’s attention.
Even though I’m spending a lot of logged work-hours on fiction writing (it is useful to track writing hours, just like a job, if you want it to be your job), I make money on non-fiction work. Expenses that support that work are tax-deductible (some of those include education, including writing classes).
But reading, listening, conferences, membership fees, materials, software…I won’t count those things for 2015 because I made no money. Not “only a little.” None. I couldn’t in good conscience stand in the witness box and say I was a Writer, With Intent to Make Money as a Business. That’s my personal line in the sand – yours may be different. Just know where it is.
Maybe this year I’ll get that sale, and feel ready to proudly defend my Job, not my hobby.
Here’s to more write offs in 2016!
For what it’s worth, ‘Intent to Make Money as a Business’ in this case is generally supported by rejection letters and emails [love those rejections!] and also copies of the queries and cover letters that led to said rejections. I am not a lawyer, tax adviser, nor do I work for the IRS or H&R Block. But think of how you prove intent. If you have paperwork to back it up and want to claim it, consider that.
Excellent advice for early-career writers.
Oh! Fascinating!
I also include a proportion of all expenses related to my home (insurance, utilities, and maintenance) because I work from there. My husband worked out the square footage of my office in relation to the square footage of our house and deducts the equivalent percentages of the expenses incurred.
I also claim back any fees from my ISP
One thing that I discovered in researching this is that you can only deduct the cost of those things from your *writing* income. If you have more than one job, you can only make writing income deductions up to the amount you made from your writing. You can’t make further deductions from the money you made at your other job.
Again, confirm with a professional, but this was what I uncovered.
I am an attorney, although not a tax attorney nor a CPA. However, this advice is generally incorrect. It certainly applies if your writing is a hobby, and it applies to certain passive activity incomes (such as rental real estate), however it is not the general rule.
As for the questions MRK asked, I am not sure of the answers to those.
I was told that I could count magazines, books, movies, newspapers, etc. because they are all research, and that’s how I classify them, though it hasn’t been challenged. I like your ‘staying current with your field’ label, but research [R&D] is tax deductible for sure, and let’s face it, all of our reading and story-watching is pouring data into the brain, that will source projects tomorrow, next year and next decade. A friend who did get audited claimed her newspaper subscription as a business expense for that reason, and showed a 1″ clipping from ten years before that had been the germ of an idea for a novel she wrote, sold and earned much money for. She showed it as an example of the vast net we throw to get ideas, and how much we actually do take in so that we can build our worlds, characters and stories. So for me, ‘research’ is the category I use.
Even during a time when I had no income for a number of years, a friend who was fairly high in the hierarchy of the IRS told me to by all means take my losses and count them. Each person is viewed individually when they are audited and he thought authors were relatively adept at proving their points. [Ahem.] He actually called being a writer as having a license to steal, said with all the love. But the point he made was that some farms and businesses show losses for years and the IRS still considers them businesses and allows them to take those deductions even when they have no income. In my case, he said it would be difficult to impossible for any auditor to deny that I was a professional and that my expenses were legitimate as I pursued new avenues for publications, even if I was in a dry spell.
No credentials, but I am happy to toss this into sludge of answers. If people with credentials or experience have differing opinions, I will be very happy to know it.
Oh yeah, the same guy said, “Claim everything. Push the envelope. As long as you have receipts, go for it. Odds are it will never be questioned and if something is ultimately denied it’s not the end of the world.” Now that he’s retired and working as a consultant, that’s what he does. For what it’s worth.
I was told that I could count magazines, books, movies, newspapers, etc. because they are all research, and that’s how I classify them, though it hasn’t been challenged. I like your ‘staying current with your field’ label, but research [R&D] is tax deductible for sure, and let’s face it, all of our reading and story-watching is pouring data into the brain, that will source projects tomorrow, next year and next decade. A friend who did get audited claimed her newspaper subscription as a business expense for that reason, and showed a 1? clipping from ten years before that had been the germ of an idea for a novel she wrote, sold and earned much money for. She showed it as an example of the vast net we throw to get ideas, and how much we actually do take in so that we can build our worlds, characters and stories. So for me, ‘research’ is the category I use.
Even during a time when I had no income for a number of years, a friend who was fairly high in the hierarchy of the IRS told me to by all means take my losses and count them. Each person is viewed individually when they are audited and he thought authors were relatively adept at proving their points. [Ahem.] He actually called being a writer as having a license to steal, said with all the love. But the point he made was that some farms and businesses show losses for years and the IRS still considers them businesses and allows them to take those deductions even when they have no income. In my case, he said it would be difficult to impossible for any auditor to deny that I was a professional and that my expenses were legitimate as I pursued new avenues for publications, even if I was in a dry spell.
No credentials, but I am happy to toss this into sludge of answers. If people with credentials or experience have differing opinions, I will be very happy to know it.
Oh yeah, the same guy said, “Claim everything. Push the envelope. As long as you have receipts, go for it. Odds are it will never be questioned and if something is ultimately denied it’s not the end of the world.” Now that he’s retired and working as a consultant, that’s what he does. For what it’s worth.
My accountant is pretty aggressive and we don’t deduct books. I think you’d have to argue with a straight face that you wouldn’t otherwise buy them.
Writing supplies the majority of my income at this point. I would definitely buy different books, if I were not trying to stay current. Reading strictly for pleasure almost never happens these days.
Plus the percentage of your home you use for writing/art can be deducted as an expense and the same for utilities. So if 15% of your home is your sacred writing nook and bookshelves, it and 15% of your household bills, can be deducted. In my old studio 75% of my space was studio and so 75% of my bills for that spaces were a write off as a business expense.
I’m a video games journalist, but the tax law (UK) seems to be dubious, when it comes to professions that include things that are ‘fun’. I didn’t deduct my PlayStation 4, last year, as I don’t think they would believe it was purely for work. I write about every game I play, so it is work and I would probably have waited for a price drop, if I didn’t need to be current.
Because I also watch TV via my PS4 I felt I couldn’t deduct it, but I do deduct games because I have articles attached to almost every one and couldn’t do my job if I didn’t play games.
My husband the Enrolled Agent (America’s Tax Experts TM) would approve your expenses. (HA I don’t have to do my taxes either!)
His entertainment industry clients can take their music and concert costs (as musicians) or movie-watching (as directors/producers). It is reasonable that you need to keep up with the current state of your industry.
As a rule, if you are able to defend it should you be audited (or better yet, have a trained tax controversy specialist like an Enrolled Agent do so on your behalf) as “reasonable, customary, and necessary” to your business, it is a justifiable business expense. Is it reasonable- if you are making $15,000/year and you deduct $5,000/month on books you read, no. No one spends that much on books and also it is a huge loss you’re trying to take. But a few hundred in research on what your competition is doing and what’s selling, yes. Is it customary- do others in your or similar fields use the same method to keep up on what others are doing? Yes, they do in this case. Is it necessary- could you sell work without knowing what saleable work looks like? I’d say no. Does it help you improve your skills as an author and narrator? I’d say yes.
Again, if you could honestly defend it if asked to and have receipts to support it, it passes the “reasonable, customary, necessary” test, and it makes a difference on your taxes- take it!
If you take the home office deduction be very careful as this is a trigger for audits. The space you claim must be 100% dedicated to the work. If you have something/anything in that space then the deduction is disallowed. I know someone who was visited and had his office inspected (and passed) but was challanged.