Note from Jane: Today’s guest post is by attorney Helen Sedwick (@helensedwick), an attorney licensed to practice in California only. She just released the Self-Publisher’s Legal Handbook, now available in ebook and paperback formats.
This information is general in nature and should not be used as a substitute for the advice of an attorney authorized to practice in your jurisdiction.
Most writers don’t realize that their memoir, short story collection, children’s book, or novel could mean money in their pockets, even if sales are disappointing.
Suppose you spend $5,000 hiring editors, designers, and other freelancers to publish your book. At the end of the year, you’ve made $2,000 in sales, which you offset with $2,000 of expenses. Can you deduct the remaining $3,000 from your “day job” income and reduce your income taxes?
Yes, if you treat your writing as a business and not a hobby.
U.S. tax code encourages new businesses by permitting entrepreneurs to offset losses from one business from other income as long as the owner has a serious intent to operate the business at a profit. The IRS wants you to succeed, so they can tax your income later.