When the time is getting close to file your first tax return as a book author, the more you know about your deductions, the better. Sure, your pens, computer printer ink, and paper are tax-deductible—but there are other tax deductions you may be eligible to take. If you've never before filed taxes as an "author" but would like to, first determine whether your writing efforts qualify as a business, as opposed to a hobby.
Of course, general good record-keeping rules of the IRS apply here. Save receipts, note the names of guests at meals or events, and make sure to clearly state the business purpose of the expense, and be sure to double-check assumptions with your paid tax preparer informed. That way, if the IRS audits you, you'll have a clear recollection and confirmation of your legitimate business deductions.
Deduct Paid Contractors, Freelancer, and Agency Fees
Did you pay an editorial freelancer to edit your manuscript? Did you pay a graphic artist to design your book jacket? Photographers, illustrators, copyeditors—the fees paid to book development contractors are tax-deductible, as are the costs of outside services, such as a freelance publicist, a website developer for your author website or a video producer for your online book trailer.
Literary agents send authors their royalty checks during the year with the agency percentage fees already deducted off the top of their income, and the year-end a 1099-MISC form an author gets from his or her agency would reflect that. If that's true in your case, of course, you wouldn't claim the agency fees as a deduction, because they already been deducted from your income. Claiming them twice would be double-dipping.
If you pay an independent contractor or freelancer more than $600 on your book project, you'll need to send both the contractor and the IRS a Form 1099-MISC (assuming you did not withhold any taxes from the contractor or freelancer's fees).
What Is "Meals and Entertainment" Expense?
Most meal and entertainment expenses that relate to your profession as an author are deducted at 50%, as long as the event has a clear business purpose, you keep records of the discussion, and you keep receipts for anything over $75. That means if you're paying for lunch with an interview subject for your book, or are having lunch with your freelance publicist to discuss book publicity campaign strategy, half of the expense is tax-deductible.
However, the IRS allows 100% deductions "if you provide meals, entertainment, or recreational facilities to the general public as a means of advertising or promoting goodwill in the community. For example, neither the expense of sponsoring a television or radio show nor the expense of distributing free food and beverages to the general public is subject to the 50% limit."
If you rented space and to hold a public book reading party for your new novel, the costs of renting the facility and paying the caterer may be deductible at 100%, because the purpose of the event is to advertise and promote your newly-released book.
Author Advertising Expenses
The Schedule C category "Advertising" is used broadly to encompass many expense items on your book marketing and publicity plans related to promoting yourself and your writing.
Some examples of Advertising items specific to authors are:
- Ads: The design, creation, and placement or media fees of print (newspaper or magazine), TV, or Internet advertising. This includes pay-per-click fees, or paid placement in a catalog related to your book (for example, having your book listed in Ingram or Baker and Taylor's book wholesaler catalogs or listing).
- Branding and logo design: For you as an author to establish a recognizable look to attract readers to your book or series of books.
- Flyers, brochures, mailers, business cards: For your public appearances, like readings or book signings at a book festival. You can deduct the cost of design, printing, and distribution.
- Promotional items or giveaways: Ssome examples might be bookmarks, book bags that promote your title or your book jacket design, tee shirts, pens, or pads.
- Signage: For example, to announce your book signing, and display costs. This could include banners, posters—even a billboard if you had the budget for it!
- Website costs: These include the design and development of your author website, as well as monthly or annual hosting fees.
- Newsletters: If you pay for a newsletter service like (like Constant Contact or MailChimp) to send out newsletters to your readers, the monthly fees are tax-deductible.
If you are a self-published author who paid an all-inclusive fee to publish and promote your book, make sure you check to see if promotional items are included in your package. Depending on your tax status, you may be able to break out the cost of these advertising fees to include them in your Schedule C deductions.
This article is meant to give a general insight into tax information that might apply to writers, and to provide readers an entry point so they can research further. While every effort was made to ensure the information in this article was accurate at the time it was written, the Book Publishing site guide is a writer—not a tax expert. Therefore, anyone filing their taxes should consult a qualified tax preparer or tax expert for updated federal and state income tax and sales tax laws and further specifics on how these rules might apply to an individual tax situation.
For specific IRS resources regarding the subjects mentioned in this article, refer to IRS Publication 334 (2012), Tax Guide for Small Business. The general information included in this article is not to be used to avoid tax penalties that might be levied by the IRS (see the Treasury Circular 230 regulation for the specific provision).