Freelance writing is a great hobby. It can also be a great business. Knowing which you want it to be can help you when it comes time to file taxes.
If you make a little money on the side and don’t consider it a serious source of your income, then chances are the IRS isn’t either. It’s a hobby and, while still needing to be claimed as a source of income, won’t be considered a business.
The IRS will believe your claims that your writing is a business if you show a profit three out of the last five years and if you are making a serious attempt to support yourself with your writing. Taking classes, having a home office, and subscribing to various publications designed for the serious writer can help you legitimize yourself as a business.
During tax time, you will use a Schedule C to itemize your deductions for your writing business. This itemizing will help you reduce the amount of tax that you owe from your writing. This deduction itemizing can only be done when you are a business and not as a hobby, another reason to make a serious attempt at making your writing a business. You will need a receipt if your deduction is over $75, but otherwise are fine for smaller deductions. Keep good records and your receipts/files for five years just in case the IRS wants a closer look.
Common Writing Deductions
1. Transportation costs associated with business meetings, interviews, and trips associated with your writing.
2. Phone calls for any writing related content.
3. Postage and office supplies. This includes paper, faxes, computer equipment, printer ink, envelopes, and other office related expenses.
4. Office equipment such as fax machines, phone recorders, printers, scanners, copiers, etc.
5. Conventions, seminars, classes, and workshop related expenses. These are furthering your education in your business.
6. 50% of your business lunches.
7. 50% of your meals and lodging while traveling for business
8. Books, magazines, and newspapers…whether writing related or not, they are “research” as long as you think that you may query them in the future.
9. Business cards and any advertising
10. Professional memberships and dues, such as the RWA.
11. Health insurance premiums.
Home Office Deductions
1. Mortgage interest or rent, real estate taxes
2. Water, electricity, phone, and utilities. The way that you deduct these is by a percentage. If your home office is a 10 x 10 room in a 1,000 square foot house, your percentage that you can deduct is 10% of the total yearly cost. Make sure you have a real home office, not just a desk in a corner of the room.
3. Insurance premiums, in the same percentages.
This is not legal advice, its a general guide so that you can explore and perhaps give you ideas on what can and cannot be deducted as a writing related expense now that taxes are on your mind.