Are You a Professional Writer? Would the IRS Agree?


I’m a professional writer. Are you? Thousands of dollars in taxes can often ride on a single question: is a writer a professional or an amateur?

One of the things I’ve written recently is a new white paper for my client 1800Accountant.com that details the rules that state and federal tax authorities use to determine the tax status of writers.  The white paper is available free on the resources page of the 1800Accountant.com website.

Why It Matters: Keeping What You Earn

Whether you are a novelist, blogger, freelance journalist, poet, technical writer, copywriter or non-fiction writer, if you earn your living by writing copy on spec or on assignment, how your craft is defined by the tax authorities makes a big difference.

Amateurs or hobbyists – writers who keep a journal to help them make sense of life, for instance, or those who write fan-fiction that is not intended to earn money – are not entitled to tax deductions for the costs incurred in their writing.

Professional writers – those who support themselves and their families in whole or in part from the income earned from their writing, or hope to do so within a few years – can deduct the costs they incur while creating their work.

Simple, right? But what if you’re writing a first novel, or investigating a complicated issue for a series of non-fiction articles or book, and you are spending money without immediate income. Can you deduct expenses related to that “speculative” work from income earned from other projects? What if your blog isn’t making money (yet), but you hope to monetize it later?

The answers to those questions and many others are in the white paper, prepared with help from the tax experts at 1800Accountant.com, the leading national resource for home-based businesses and freelancers of all kinds. I learned a lot while writing it, and I’ve been filing taxes on income earned at least in part as a writer for over 40 years.

Home Office Deb McAlister-Holland

My husband and I hired a top interior designer to create a custom home office complete with designer furnishings, antique light fixtures, framed memorabilia, collectibles and three walls of built-in bookshelves. Because most of the designer touches weren’t necessary business expenses, they weren’t deductible. The cost of the dedicated Internet connection and phone line, extra power outlets, and new computer gear are treated as deductible expenses under multi-year business depreciation rules. We can deduct the costs of operating our home office each year.

Tax Myths About Writing

Then there are the myths about taxes that many writers believe.  Here are five that I often hear from other writers. (Several other common myths are covered in the white paper.)

Myth #1: It’s OK to throw away those K-1 statements that Amazon.com sends you showing a tiny royalty payment, because only amounts over $600 are taxable. (Wrong. Even a few pennies of royalty income is taxable, and the company paying royalties reports every cent to the IRS. If you don’t, you’ll probably trigger an audit for trying to evade taxes by not reporting all of your income.)

Myth # 2: Deducting the cost of your home office is difficult because of all the records you have to keep, and it’s sure to trigger an audit. (Wrong. For 2013, there’s a new flat-rate deduction that requires far less paperwork and there’s no longer a clear link between an audit and the home office deduction.)

Myth #3: You can deduct the full retail cost of books you donate to a charity. (Probably wrong. If you pay full retail, then you can deduct the retail price. But don’t get greedy with non-cash tax deductions. If you make a non-cash tax deduction such as books to a 501(c) (3) tax-exempt organization, scrupulously follow the rules, and file a Form 8283. ARC’s aren’t tax deductible, and neither are free copies you receive from your publisher. If you buy copies for donation at a discounted price, then the actual price you paid is deductible. And don’t even think about deducting the value of time you donate to write copy for a charity; it isn’t deductible.)

Myth #4: Copyrights and manuscripts are capital assets, and you can claim income from the sale of those rights (like movie rights for a book published more than five years ago) as capital gains, so you pay taxes at a lower rate. (Wrong. The law specifically excludes copyrights, artistic and literary material held by the taxpayer who created it from qualifying for capital gains treatment. Rights sales and licenses, royalties, advances, grants, prizes and awards for what you write is “ordinary” income taxable at a higher rate than capital gains.)

Myth #5: Writers can deduct non-payment by publishers as a bad business debt. (Wrong. Most writers are cash method taxpayers. That is, we don’t report the income until we get paid. So non-payment of monies owed, but never claimed as income and taxed, can’t be deducted.)

Read my complete checklist of tax deductions for writers, bloggers, and journalists by downloading the white paper now. It’s called Taxing Questions: What Makes a Writer or Blogger a Professional? The document includes sections on:

  • What Makes a Writer a Professional?
    • Defining a Professional Writer
    • What if I Fail the Profit Test?
  • Manage Your Writing Like a Business
    • Consider Incorporation
  • Why Tax Deductions Matter
    • 5 Tax Rules Professional Writers Can’t Afford to Ignore
    • Additional Tax Deductions for Professional Writers
    • Additional Tax Deductions for Professional Bloggers

The new white paper is now available for free download on the Resources page of the 1800Accountant.com website.  There’s also a separate white paper for artists, musicians, singers, actors and other performers on the same website.

Photo credit:  I snapped the photo of one corner of my home office. ©2013, Deb McAlister-Holland; all rights reserved.  Do not reuse without written permission.
FTC Disclosure: I was paid by 1800Accountant.com to write the white papers discussed in this blog post, but was not paid to promote them on my personal blog. I’m sharing it here because I want to help other writers pay less in taxes on the money they work so hard to earn.

About debmcalister

I'm a Dallas-based marketing consultant and writer, who specializes in helping start-up technology companies grow. I write (books, articles, and blogs) about marketing, technology, and social media. This blog is about all of those -- and the funny ways in which they interesect with everyday life.
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11 Responses to Are You a Professional Writer? Would the IRS Agree?

  1. Mikel Auzmanta says:

    Thanks a lot for sharing this with all of us.

    You really recognize what you’re speaking about! Bookmarked.

  2. Twila Teague says:

    Hello, just wanted to tell you, I enjoyed this article.
    It was practical. Keep on posting!

  3. JTS says:

    Thanks , I’ve just been looking for information about this topic for a long time and yours is the best I’ve found out so far.

    But are you sure about the home office deduction not triggering an audit? I’ve always read that it did.

    • debmcalister says:

      Hi — I’m not an accountant or tax expert; my blog post repeats information I got from a tax expert (Gary Milkwick, CPA and vice president at 1800Accountant.com), but it’s always possible that I am mistaken. So check with your own tax advisor — and if you don’t have one, click on this link to schedule a free consultation with one of the tax experts at 1800Accountant.com. Regards, Deb

  4. Pingback: CHARITABLE IRS DEDUCTIONS 2014 Updates

  5. Jessica S says:

    Great post! Thanks for sharing! When I first started, I had to simply concede my office would not be tax deductible. I only use it for my business, but I do occasionally use it as a non-business reading room (not to mention the few craft supply tins that have walked in without my consent…). Can’t wait to read the whitepaper. Hopefully, it has the link to that flat-rate deduction you mentioned.

    • debmcalister says:

      Hi, Jessica — no link needed re the flat-rate deduction. It’s a simple calculation, with the explanation right on the self-employment tax form. For once, the IRS made something easier! You are still limited to deducting only space used exclusively for business, however. So although we have two home offices in our house (mine and my husband’s), we can only deduct one because the other doubles as a movie room and has the big-screen TV & recliners in it.

      Thanks for visiting and taking time to comment!

      Regards, Deb

  6. Pingback: Are You a Professional Writer? Would the IRS Ag...

  7. Pingback: Myths about freelancing and the IRS | Resources for Writers

  8. Pingback: Myths about freelancing & the IRS | Resources for Writers

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