Ahhhh! Tax day is coming! Yes, once again April 15 is almost upon us. Hopefully you’ve already filed your taxes for 2015 by now, or you’re about to. And if you’re a writer (or are otherwise self-employed), hopefully you’re also deducting your writing expenses.
OK, so I’m no tax expert, but I have been filing my own taxes for my entire working life. And I only started using TurboTax when things got a little more complicated — namely, when I started treating writing like a business.
What does that mean? How do you distinguish writing as a hobby from writing as a business? Look deep within yourself for the answer: Are you trying to make a go of a full-time professional writing career? Or are you writing for fun and an occasional story sale?
If you want to write for a living, writing is your business, even if you have a day job that helps pay the bills. If you are starting to sell stories or novels and getting paid for your work, it is definitely a business. In either of these situations, you should consider keeping track of all your writing-related expenses and claiming them as deductions on your tax form, typically using Schedule C (Form 1040) Profit or Loss from Business. In the early years, possibly longer, this is probably going to be more losses than profits, but that’s okay, as long as its not from lack of trying to earn money and you can demonstrate your intentions.
What writing-related expenses can you deduct? You’d be surprised. If you’re attending workshops, conferences, or conventions, you can deduct some or all of your travel and meal expenses. If you’re a writer, you’d better be a reader, so deduct those books, especially the ones you buy for research. (Warning: This may lead to an increase in the number of books you own, because once you know you can claim that purchase as a deduction…) Meals and drinks with other writers can also be deducted, as well as entertainment expenses! Did you buy a new laptop that is exclusively (or mainly) used for writing? Go ahead and deduct all or part of that purchase.
Look, don’t be shady about it. Only you know if these are legitimate writing-related purchases, and you should hold onto receipts and documentation to justify it, should you ever be unfortunate enough to face an audit. But don’t be nervous about it either; you’re entitled to these credits for the considerable time, work, and money you’re investing in your career. Because once you start selling stories and books, the IRS will most certainly be happy to shave off a significant portion of your earnings in income tax. Filing your self-employment taxes can seem intimidating, but Writer’s Digest has a good overview, and you can find lots of information online or consult with a tax professional.
But here’s my one big tip if you’re deducting your writing expenses regularly, which I wish I had thought of years ago: If you can, dedicate one of your credit cards to only writing-related purchases and activities. My wife suggested it to me last year, and this is the first full year in which I’ve implemented it, and wow, it made tracking my expenses so much easier! Everything is in one place and nearly itemized and organized by categories, such as travel, meals, purchases, etc. in the yearly report.
Having this system cut my tax preparation time by more than half, because I wasn’t digging around multiple credit card statements, receipts, and e-mails to account for everything. I typically also maintain an Excel spreadsheet throughout the year, which I forget to update until tax time, and the credit card statement more or less replaced that because I made a habit of charging everything. No fuss, no muss.
Do you have any tax “hacks” like this that work for you? Other tips or suggestions? Drop them in the comments below. And I wish you many happy returns!