There's great joy in getting your first royalty check, but an equally large letdown when it comes to tax time. The government considers royalties income, and you've got to claim it on your tax form at the end of the year. Fortunately, writers are allowed a large number of deductions for expenses incurred in the act of writing. Obviously, the best advice is from your tax accountant, but here are some of the most common deductions a self-published author or writers can take to decrease their taxable income.
Subscriptions - Most writers subscribe to writer's magazines, journals and newsletters. They're necessary research, including topic magazines nonfiction writers need for their research.
Websites - If you build and keep up a website to promote your work (and every writer should), you can deduct the cost of building the site, including Wordpress themes, hosting costs, and the price you paid for your domain name.
Local Travel Expenses - Keep track of your mileage when traveling to the library for research, to local bookstores to arrange book readings, and even the mileage used to buy office supplies.
Phones - The rules have tightened for phones and phone calls, but if you keep a dedicated cell phone strictly for business, and never use it for anything else, you can deduct the cost of this monthly bill.
Business Travel - Trips to writers conferences, visits to environments for research purposes, and even traveling to hold a writer's tour of reading spots, can all be deducted as legitimate business expenses. You can deduct airfare and hotel costs, but only 50 percent of the meal cost is deductible.
Agent Fees - Your agent may be a great help, but she doesn't work for free. Deduct those fees at the end of the year.
Outsourcing - If you pay someone to help you finish your work, the cost of this pay is deductible. For example, if you pay an editor or book cover designer, deduct those fees.
Supplies - These are business items you use up in less than a year. Think printer paper, printer ink, paper clips, pens and pencils, notebooks, and even DVDs with research information on them. If their primary purpose is to help you to finish writing and publishing your book, they're deductible.
Insurance - If you're self-employed and you don't have any income besides your royalties and payments related to writing, you can deduct 100 percent of your health insurance premiums. If you have a home office, part of your homeowner's insurance may be deductible, too.
Professional and Legal Services - Deduct the fees from accountants, attorneys, consultants, website designers, and other professionals needed in the course of running your writing business.
Research Expenses - This one can be tricky, so keep detailed records and file all receipts. Research needed for writing your book can be deductible, as long as you can prove the information learned is needed for your work. The cost of paying a researcher or virtual assistant for doing the work for you is deductible, as well.
Meals and Entertainment - It's not like the old days, when you could write off any expensive lunch and call it business. However, if you need to hold a serious business discussion with an editor or other professional, you can certainly have this talk in a restaurant and deduct 50 percent of the cost of the meal. The same goes for basketball games or other entertainment trips. It's a fine line, so document thoroughly.
Tax advice online can be useful, but the final, legal word rests with your tax accountant and the IRS. As Susan Lee, tax preparer and accountant, writes on her advice site:
No Rendering of Advice The information contained within this website is provided for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional tax planner or financial planner. Presentation of the information via the internet is not intended to create, and receipt does not constitute, a tax planner-client or financial-planner-client relationship. Internet subscribers, users and online readers are advised not to act upon this information without seeking the service of a professional tax and/or financial planner.
Keep the Faith and May the Force Be With You!
This article originally appeared in Infinity's Publishing Blog for Authors and Writers