When Your Home is Your Office

Most writers work at home. Some of us even have a dedicated office. That's mine in the picture.

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

Write On and Write Off

I should have written this post two months ago. Not because you may have already filed your taxes for 2009, but because how much you can deduct depends on what you do during the tax year. But even though this advice would have beeen timelier in January, it's still not too late for your 2010 taxes.

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.

There are three sure-fire ways to convince the IRS that you write as a hobby.

1. Write only when the spirit moves you. (The converse of "write regularly.")
2. Write, but don't submit.
3. 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.

So if you want to deduct your excess expenses, make sure you treat writing as a business.

Kathryn Page Camp