April 15 is just about here. Once again, the better part of a week has been spent shuffling together receipts and organizing them for the tax accountant. The remarkable thing about this exercise is not just the discovery of what can’t be taken as a deduction, but what can be taken as a deduction.
First, a quick disclaimer: I am not, nor have ever been a tax consultant or attorney. The following is my experience. Any tax questions should be addressed to a tax professional. Milage may vary.
While writing may not currently be my primary source of income, it is certainly my primary occupation. I don’t get paid enough for the work I put in, and I’m working toward changing that. It is not a hobby either. I’ve invested uncounted hours at the keyboard and lost numerous hairs that might have turned gray at some point over the craft.
In this argument lies my claim for writing expenses to be used as itemized deductions. But tax code is never as clear as it should be. I’ve been confused by what the IRS and the Massachusetts Department of Revenue (DoR) will allow for deductions. I have learned, basically, one must err on the conservative side. As long as ongoing work for a project can be demonstrated, expenses can be itemized and deducted.
So the real question becomes, how much can I deduct in writing expenses? The basic answer is anything up to my income, as long as it can be justified as writing-related. I’m allowed to have more writing expenses than income as long as it can be shown that work is ongoing, and not just a hobby.
This comes with a caveat. Certain research materials may not be deductible, because they weren’t used in any works. If I purchased a book, say, on 19th century ice cream manufacturing, and didn’t use any of the material in my writing, it becomes very difficult to justify the expense as writing-related. Other books, however, like fiction works by other authors like Kurt Vonnegut could be argued to be legitimate expenses for keeping my skills up and being aware of the field, but it’s made easier when I write commentary and post it on my web site for all to see, since my web site is also a marketing tool for my career (which, by the way, is also entirely deductible, including the software I use to design the graphics and the web hosting fee I pay each year.) The point is to try not to purchase more material than you think you’ll use in that year. And if someone knows that trick, please tell me.
Last year I deducted a research trip to Omaha. That means I was able to take the gas expenses, hotel expenses, and museum admissions off my taxes. Theoretically I could have taken my meals as well, but only listed those that I knew I had conducted business at, such as interviewing people over coffee, etc. At the same time, I wouldn’t have been able to deduct anything from the trip if none of my experiences made it into my manuscript. To prove use of the trip as a business expense, I’ve saved a copy of a pre-trip manuscript, and a copy of the post-trip manuscript, complete with descriptions of the midwest, the perfume counter at Dillard’s at the Crossroads Mall, and the varieties of pie at the Village Inn. (This was a cinch, since I keep electronic copies of all versions of my work.)
Another example is last year’s Muse and the Marketplace conference. The cost of the conference, the parking at the train station, and the ride in on the train can all be deducted in my case, because I work from home, and therefore any travel expense is conference-related. The key is keeping the evidence that the trip is work related. I took extensive notes on the sessions I attended, saved all the handouts with markups, put contact names into my address book, and bound the whole package and filed it away. Further evidence is that the meeting I had with the agent, and her feedback, were incorporated in my manuscript, and I’ve kept all email correspondence with her, as well as a developed query letter that benefited from further markups.
Other expenses that can be taken as deductions include things like books used as research, museum admissions, office supplies, office equipment, repairs to the equipment, and postage. And my $35 copyright fee from the Library of Congress.
Things that I decided not to press my luck on, although I understand I could justify them as writing expenses, include the haircut I got right before my presentation to the agent, since I was also partly courting her to represent me; the square footage of my office, and associated utility costs, because although I use the desk, computer and space as my only space for writing, it’s in my bedroom, and I also pay bills and sleep at it; a percentage of my vehicle maintenance and gas costs, because I haven’t really calculated what percentage of its use is for research and marketing. (The exception to this was the Omaha trip, because I knew the whole trip was for writing research.)
So, for preparation during the course of the year, it’s important to retain every last receipt. Mark up copies of utility and phone bills with the percentage of cost used for the business. And keep everything filed away neatly for reference for April 15.
The tax lessons continue as time goes on. Many of them I already knew from running a theater company in Boston for 4 years. Some are new, like how to keep careful track of every receipt, catalog them, and store them in case the IRS or DoR decides to audit, for the undetermined future, because unlike the rest of the law, the revenue code has no statute of limitations, and once one year’s taxes are audited, several others are likely to follow.
In the meantime, I’ll continue to develop this web site as a marketing tool for my writing, and write reviews and comments on books for the blog, and deduct those costs as well. Now, can I deduct the cost of a massage for tax-related stress relief?