To deduct writing expenses that exceed your writing income, you must convince the IRS that you are writing to make a profit rather than as a hobby. There are two ways to do this.
If you make a profit three out of five consecutive years, the IRS will presume you are writing to make a profit and will allow you to deduct the excess expenses in the losing years. If your crystal ball says you will have that kind of success, go for it.
Most of us can't predict whether we will meet the presumption, though. So there's a second way to show the IRS that we are writing to make a profit: treat writing like a business. Here are some tips on how to do that.
- Follow established accounting and recordkeeping practices and comply with legal requirements. You should maintain detailed records of your writing income and expenses and keep them separate from your personal finances. It also helps to have an annual budget, a business plan, and records of non-financial activities (e.g., a submissions log). If you sell your books at speeches or fairs or from the trunk of your car, make sure you have the necessary business licenses and pay sales taxes to the state.
- Gain the expertise to succeed as a writer. This has two prongs: training and expertise in writing itself (e.g., attending writers' conferences) and expertise in the subject you are writing about (research, research, research).
- Write regularly.
- Submit your work to paying markets. It's okay to submit to non-paying ones occasionally, especially if you do it to gain exposure, but you should concentrate your efforts on paying markets.
- Don't avoid the parts that aren't fun. For me, this means spending time on promotion.
- Write only when the spirit moves you. (The converse of "write regularly.")
- Write, but don't submit.
- Publish, but don't promote. This is especially true if you self-publish. If you use a traditional publisher, it is one of the factors the IRS will consider.
Kathryn Page Camp