Tax Deductions for Writers
Are you a professional writer? That is, is your writing activity a business? If so, there are many deductions you can take to reduce your taxable income for the year, and thereby reduce your taxes. These deductions are quite valuable–for example, if you’re in the 25% tax bracket, each $100 in deductions saves you $25 in income tax. It will also usually save you about $15 in self-employment taxes as well.
Common deductions taken by writers include:
Office Expenses: If, like most writers, you work at home, you may be able to deduct the cost of your home office. This deduction is particularly valuable if you are a renter because it enables you to deduct a portion of your monthly rent, a sizable expense that is ordinarily not deductible. If you rent an outside office, the entire cost is deductible.
Depreciation: When you buy property for your writing business that will last more than one year, you may deduct the cost a little at a time over a period of years. This process is called depreciation. Examples of depreciable property often used by writers include computers, cell phones, and office furniture. However, you don t always have to depreciate long term business property. Small businesses have the option of deducting the entire cost of such property in a single year under Internal Revenue Code Section 179 or using bonus depreciation This enables you to get a big deduction in a single year rather than spreading it out over several years.
Supplies: Supplies are business items that you use up in less than one year. They include everything from paperclips to postage stamps.
Subscriptions: You can deduct the cost of magazine, journal, newsletter, and other subscriptions useful for your writing business. This would include, for example, the cost of any magazine to which you may wish to sell a freelance article.
Research Expenses: Professional writers may deduct their research expenses such as the cost of books or hiring a researcher.
Legal and Professional Services: You can deduct fees that you pay to attorneys, accountants, consultants, and other professionals if the fees are paid for work related to your business.
Insurance: Self-employed people, including writers, are also allowed to deduct 100% of their health insurance premiums from their income taxes. In addition, If you have a home office, you may deduct a portion of your homeowner’s insurance.
Websites: You can deduct the cost of designing and maintaining a website you use to promote your writing business. You can also deduct your Internet hosting fees and the cost of obtaining a domain name.
Outsourcing: If you hire people to help with your writing business, you may deduct the cost as a business expense. For example, you could deduct the cost of hiring an editor to edit your work or a proofreader to proofread it.
Agent Fees: If you have a literary agent, you may deduct all the fees that person charges.
Business Travel: You may also deduct your expenses when you go out of town for your writing business–for example, to attend a writing-related conference or workshop, conduct an author’s tour, or do research or interviews for a specific article or book. These expenses include airfare or other transportation costs and hotel or other lodging expenses. But, you may only deduct 50% of the cost of meals when you travel for your writing business. If you plan things right, you can even mix pleasure and business and still get a deduction.
Meals and Entertainment: The days of the deductible three-martini lunch are pretty much at an end. To deduct the cost of a meal in a restaurant or an entertainment event like baseball game or theater visit, you must have a serious business discussion before, during, or soon after the event. Moreover, you may only deduct 50% of your business meal and entertainment costs.
Home telephone expenses: You get no deduction for a single phone in your home; but you may deduct the cost of long distance phone calls and special phone services you use for business such as call waiting or a message center. You may deduct the full cost of a second phone line you use at home for business, including a cell phone.
Local Travel Expenses: Local travel may include trips to your publisher, to pick up office supplies, or driving to libraries and bookstores. You may deduct trips by car or public transportation. If you like recordkeeping, you can keep track of all your car expenses to figure your annual deduction. But, if you d rather not keep track of how much you spend for gas, oil, repairs, car washes, and so forth, you can use the standard mileage rate. When you use the standard rate, you only need to keep track of how many miles you drive for business, not how much you spend on your car.