by Michelle Joy Lander
“Income tax returns are the most imaginative fiction being written today.” -Herman Wouk
Writers and artists are notoriously right brained. While this allows for creativity, flights of imagination and pure magic, it can be a hindrance when it comes to more practical matters. Such as income taxes.
It wasn’t until I attended a workshop on finances and taxes offered by the Writers Guild of America, West that I learned the scope of deductions available to writers. The average tax preparer is not well versed in these and there are misconceptions as to what constitutes a “business” versus a “hobby.” If your objective is to make your living as a writer, you are a professional writer. Even if you also work slinging hash, teaching or performing brain surgery.
You don’t need to get all fancy-shmancy to start declaring writing as an occupation on your taxes. You can simply file a Schedule C using 711510 as the Principal Business Code in box B, along with your 1040. There are years you will show a profit and others where there will be a loss, especially when you are just starting out. While it is always better to show a profit rather than a loss, the IRS is not likely to question that a “new” business is operating at a deficit (even if you have been writing since you were five, the IRS will deem it as new if it is your first year filing). The good news is that the loss will offset other income and reduce your overall tax liability. This is information I have garnered over the years. I am not a professional tax preparer, so be sure to check the IRS instructions or seek professional help if you are concerned about a specific issue.
The most important thing is to keep records. Since I am not the most organized person on the planet, I opened a separate bank account and have a credit card dedicated to business expenses. There are all sorts of expenses writers can deduct.
Deductions allowed include:
Books Books Books! – Any book you buy can be considered a deduction, as well as magazine subscriptions and newspapers, whether in newsprint or online.
Office supplies – Basically anything you can buy at Staples or Office Depot for your writing can be deducted.
Equipment – Before you run out to Apple to buy a new MacBook Pro know that IRS Section 179 states you need to use the computer for your writing more than 50% of the time to deduct the full amount. How they would ever determine this beats me. And I figure I can always claim that I use online Scrabble to build my vocabulary. Under Section 179, you can deduct the cost of equipment bought for your business in a single year rather than depreciating over five years. This includes office furniture. Pottery Barn, here I come!
Memberships – Membership fees paid to professional organizations such as AWP, WGA, PEN, Poets & Writers and a multitude of others can be deducted. You can find a detailed list of writing organizations at www.writersandeditors.com.
Telephone/Internet – I choose to deduct 50% of the costs for my cell, landline, Netflix and Internet to keep the wolves at bay.
Car expenses – The easiest method is to keep a log of miles driven for writing related activities: meetings (yes, Women Who Submit meetings!), seminars, readings and anything related to projects you are working on. For 2015, the standard mileage rate is 57.5 cents per mile. If you are taking buses, subways, cabs or Uber, be sure to keep receipts.
Travel – Travel expenses accrued while attending conferences (standard airline tickets and hotels…I would hold off on private jets and The Ritz for now) can be deducted.
Meals and Entertainment – Here is the one area where I believe it best to be very conservative. I know people who deduct every trip to Starbucks, but I feel it is not worth the risk. It would be tragic to face an IRS audit due to a Venti Pumpkin Spiced Latte.
When you have a publishing deal, there will be even more deductions, including agent’s commissions and legal and professional fees.
Finally, there is the pièce de résistance, the home office deduction. While the IRS has simplified things so that one can deduct $5 per square foot (with a maximum of 300 square feet) used for business, it is a tad more complicated. It must be a dedicated space in your home used for your writing. This is another deduction that can be difficult to gauge. Although I have an office in my home and use it as the basis for the deduction, I rarely use it. The reality is that most of my writing is done in my dining room or on the sofa in my pajamas (not a tax deduction) snuggled up with my dogs (definitely not a tax deduction) on my brand new laptop.
For further reading check out this tax advice from Writer’s Digest.
Michelle Joy Lander is a native New Yorker living in the wilds of Van Nuys with her two furry beasts. She is currently seeking greener pastures while working on a collection of short stories and gearing up to read hundreds of submissions to The Blank Theatre’s Annual Young Playwrights Festival. You can follow her on Twitter @MichelleJLander.
4 thoughts on “A Tax Primer For Writers”
If there is only one land line into the house, you may not deduct any portion of the land line on your tax return. A little IRS quirky rule this CPA knows.
While you shouldn’t deduct the cost of the actual line, you can deduct business related calls and additional features such as call waiting and three way calling. That is why I reduce my deduction to 50%.
This is extremely helpful! I am excited about organizing all of my receipts and information for my tax guy. THANKS!