Make Your Writing a Schedule C Business

As we prepare our taxes, many of us will be entering “Writing” as our business, or one of our businesses.  I’ve been filing a Schedule C as a writer for over a dozen years.  Most of those years the sums have been trivial, rarely showing a profit or a significant loss.  With the publication of my first novel in 2007 the situation changed, and as I’ve devoted more time and effort to writing, my income has made the amounts significant.  Starting small helped me learn the techniques of creating a legitimate business with potential for long-term sustainability.

Writing as a business has tremendous tax benefits.  When I took my trip to China in 2007 I took photographs used in publishing my book “Consuto and the Rain God” the following year. Thus the whole trip was tax deductible, as well as my photography expenses.  It is wrongly said you have to show a profit three out of five years.  Below is what the IRS actually says qualifies an activity as a business:

In order to make this determination, taxpayers should consider the following factors:

• Does the time and effort put into the activity indicate an intention to make a profit?

• Does the taxpayer depend on income from the activity?

• If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?

• Has the taxpayer changed methods of operation to improve profitability?

• Does the taxpayer or his/her advisors have the knowledge needed to carry on the activity as a successful business?

• Has the taxpayer made a profit in similar activities in the past?

• Does the activity make a profit in some years?

• Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?

I’m NOT a tax advisor, nowhere NEAR being considered an expert.  Yet it seems to me all of these “considerations” are guidelines open to interpretation.  Many businesses show losses for years before showing a profit … some never do.  One has to be ready to prove the intent and efforts are there.  I keep careful records of my expenses and sales.  I have a P.O. Box, business cards, and a business checking account.  I pay monthly sales taxes to the state.  I paid for a local business license operating out of my home.

Tax benefits include deducting expenses for my home office and an appropriate portion of all the utilities and other house upkeep.  My storage shed, postage, and cable Internet bills are all tax-deductible items.  When I go on a trip and sell some books, pass out cards for publicity, or otherwise do writing business, that portion of the trip is deductible.  When I write articles about restaurants, the cost of the meal becomes another deduction.

Writing is not an easy profession; rejections are many, payment per hour work is low.  I write because it’s my passion.  By making it a legitimate business I can enjoy the benefits of tax deductions for my home and reimbursed travel as well.  And, maybe, yes MAYBE, someday I’ll write that bestseller and, Boy Howdy, I’ll show ‘em then!