Every now and again, when I ran the association Publishers & Writers of San Diego, I would deliver a seminar or brief presentation on the business of being an author. And it surprised me (at least the first couple times) how many authors or aspiring authors simply did not consider what they’re doing to be a business.
Now, it’s quite possible I took my perspective for granted because I was an entrepreneur before I was published. On top of that, I self-published my first book, so that immediately put me into business mode as an author.
But it’s important for all authors and writers to immediately recognize the business implications of their activities if there is any chance they may earn at least a little money.
And one potentially significant aspect is taxes.
No matter what you are writing about, your work is generating potentially tax-deductible expenses. So, the first things to know are (1) what to look for and (2) that ignoring these may be literally costing you money.
How these apply to your tax return will depend on the specifics of your situation, but let’s look at some of the general ways you may be able to reduce your tax liability.
Use of your home
As a writer, you probably have a desk, computer, filing cabinets, and a office-supply area in your home.
Perhaps this is just a corner of a room or perhaps you have a dedicated room as your writing center. Whatever the case, the square footage of this area has significant value as a tax deduction; in fact, it will likely be your largest deduction as a writer or author.
Basically, you deduct the percentage of your housing costs that equate to the percentage of the floor area your writing center occupies (relative to the total square footage of your home).
For example, a 100-square-foot writing center in a 1,000-square-foot condo equals 10%. So, if your housing costs for the year totaled $20,000, you would have a potential tax write-off of $2,000 (10% of $20,000).
Now, remember, that “housing costs” include many things:
- rent or mortgage
- property taxes
- condo or HOA fees
… just to name the most likely. Your specific situation may include more.
As you can see, once you add all this up, it’s quite a bit. Best of all, the percentage you allocate to your writing center is your choice, so spread out!
You don’t have to provide proof. But be realistic and don’t get greedy; the IRS will get suspicious if you claim 65% of your four-bedroom home is your writing area. (I did, however, live in an apartment once in which 50% of my space was bona fide business usage — but it was a very small studio.)
Use of your vehicle
There are two options to deduct vehicle-related expenses.
The first is actual cost, whereby you tally up the total of your expenses, including payments, taxes, insurance, gas, maintenance, repairs, and sometimes depreciation — and you keep track of your overall and author-related (business) mileage.
Just as with the home deduction, you get to deduct the percentage of total vehicle expenses that equals the percentage your business mileage (relative to your overall mileage).
Keeping track of your mileage is as simple as having a little notebook in your car, in which you write down your starting and ending mileage for author-related driving.
The second option is taking a simple mileage deduction, which was 51 cents per mile from January through June of 2011 and 55.5 cents per mile for the second half of the year. (This is for a standard passenger auto; check with the IRS for other vehicles.) As you can see, this is a lot easier and almost certainly the better option, unless you are racking up some major itemized vehicle expenses. And some quick math will prove how wise even the simple deduction can be — just 160 miles of writing-related driving a month comes to nearly 2,000 miles a year, which would land you a deduction of over $1,000.
If your income tax rate comes out to 25%, that’s over $250 saved.