With tax season coming, you may be wondering if you can deduct expenses for your writing space. Expenses like heat and electricity and property insurance.
The answer? It depends. (I bet you saw that coming.)
I'm not a tax specialist, so you should talk to your accountant before claiming home office expenses. But I can give you some general guidelines, which I have tailored to writers and am posing as questions.
1. Do you write as a business? My March 25, 2010 Hoosier Ink post called "Write On and Write Off" will help you figure it out. If writing is your hobby, you cannot deduct home office expenses. If it is a business, it still depends on the answers to the next three questions.
2. Is there a discrete part of your home that you use exclusively for your business activities? This could be a separate office or simply a desk in the dining room that is dedicated to your writing activities. If your children use the office or the desk to do their homework, it doesn't qualify. If you write on the dining room table and you serve meals there, too, it doesn't qualify. You can, however, use the space for more than one business activity. For example, if you make jewelry and sell it over the Internet, you can use the same space for that business as you use for your writing business.
3. Do you use the space regularly for your business purposes? You don't have to use it forty hours a week, but incidental or occasional use isn't enough. Unfortunately, I can't give you a bright-line test.
4. Is your home office your principal place of business for your writing activities? It doesn't have to be your jail, however. It's okay to write at Starbucks if you do your paperwork (submissions, bookkeeping, etc.) in your home office.Even if you answered all of these questions "yes," you may still have a problem. That's because how much you can deduct depends on how much profit you make. And even if the royalties are rolling in, your deduction must be proportionate to your dedicated space. If your office is 10% of the square footage in your home, you can deduct 10% of your utility bills. If the desk in the dining room takes up 2%, that's all you can deduct.
For more information, visit the IRS website at http://www.irs.gov/ and download Publication 587, "Business Use of Your Home."
Kathryn Page Camp
Thanks, Kathryn, for the helpful info that will help me think about what I deduct this coming year.
ReplyDeleteYou brave woman, posting a pic of your office. I will NEVER do that!
What a nice looking office. I am envious. I have to use the family room. But I do have a set of Bose headphones, which helps me shut out most of the noise around me.
ReplyDeleteThanks for the info.
WOW -- gorgeous office! It deserves a deduction for sure. . . :-)
ReplyDeleteI can't remember exactly how this works out, but if you claim part of your home for business space on your taxes, it will have a tax impact when you sell your house.
ReplyDeleteIf you depreciate your office space, it will affect your taxes when you sell your house. I think you might be able to deduct other home office expenses without taking the depreciation, though. But that's something to talk to your tax guy about.
ReplyDelete