Write-Off What You Know

Some tax tips for writers

William Faulkner calculating his taxes (maybe)

Few things are further removed from literary craft than taxes. They’re very dull and confusing and about the last thing artists want to think about. But as we’re approaching tax season I’ve noticed a lot of writers on social media asking basic tax questions, often unaware that they can lower their tax bill a whole lot by deducting their business expenses. And, yes, you can write off expenses and take the standard deduction.

So I thought I’d do a quick and dirty Counter Craft on tax tips for writers. Usual caveats apply: I’m not an accountant or tax professional. Double check everything included here and, ideally, work with a CPA on your taxes.

Here’s the basics of writing off what you know as a freelance writer.

If You Earn $$$ Writing Then You’re a Business

“My writing isn’t a business, it’s art!” Yes of course, but we’re not talking about aesthetics. We’re talking about lowering your tax bill. The first thing to know is there are two main types of income: 1. Employment income (W2 tax form) and 2. Non-employment income (1099 tax form). When you get 1099 income related to your writing—as opposed to say stock dividends—then you yourself are a business for tax purposes.

For a writer this means any book deals, royalties, Hollywood options, university appearance fees, magazine article payments, lit mag honorariums, etc. All of that is your business income. Anyone who pays you more than 600 dollars in non-employment income is required to report this to the IRS and send you a 1099 form. Although many will report and send for less than that amount.

And you are a self-employed business even if you also have a regular job.

Don’t I Need an LLC or S-Corp to Be a Business?

Nope. If you are getting 1099 income from writing, you are a business regardless of whether you formalize this as an LLC or S-Corp. You count as a “sole proprietorship.” You file your business income on a schedule C form… although again I’d recommend a CPA.

Business Income Means Business Deductions

On the one hand, 1099 income seems like a raw deal. You don’t get taxes taken out for you like at a standard job, meaning you owe more at tax time. And you even pay higher taxes in the FICA category. (FICA taxes include Social Security and Medicare. These are paid 50% by your employer and 50% by you. But if you’re a self-employed business, then you pay both halves.)

OTOH, you can and should lower your freelance tax bill with business deductions. Just as a regular company takes deductions, you get to take them as a solo business. The money you can write off lowers the income that is taxed, thus lowering your tax bill.

What Can I Deduct?

A whole lot. Here’s some things to write off—again check with a CPA—for your writing income:

• Agent’s fee

• Laptop, pens, etc. (these are how you do your business, no?)

• Books for research (yes, you can write off your book purchases)

• Web hosting fees for your website (aka your business page)

• Home office (if you write from home, then part of your rent and utilities can count toward a home office)

• Flights and hotels for business trips (attention AWPers!)

• Etc.

As you can see, this adds up quickly. There are plenty of guides for this online. Do your research, but basically anything that can reasonably count as part of your work can likely be deducted.

And I Can Still Take the Standard Deduction?

Yes. The standard deduction is your personal income deduction. This is your business income deduction. The former goes on your 1040 form, the latter on your Schedule C.

Don’t Forget Your Retirement Accounts

If you have a good employer, then hopefully your employer offers a 401(k) for lowering your W2 income and saving for retirement. A lot of freelancers don’t realize you can do this too. There are two retirement account options for self-employed workers: Solo 401(k) and SEP IRA. These are pretty easy to open at places like Schwab, Vanguard, and Fidelity.

To be clear: the money you put into SEP IRAs or Solo 401(k)s is taxed eventually, when you withdraw during retirement. But theoretically your income will be lower in retirement and so you will save money to have it taxed then instead of now.

Obviously these accounts are only useful if you make enough money that you have savings left over. But if you do, then look into them.

You Can Have Both a Regular 401(k) and a Solo 401(k)

You can open as many retirement accounts as you want and you don’t have to put money into them every year. If you do put money in, the cap for 401(k)s and 403(b)s (basically the 401k for non-profit employers) counts across all your accounts. The contribution cap is currently $22,500 a year. But that could come part from your normal job, if you have one, and part from your freelance work.

Although if you do have a regular job with a regular 401(k), it’s more likely a SEP IRA will be what you want.

Make Sure You Have Receipts

In the unlikely event you are audited, you’ll want to make sure you have proof of what you purchased. Receipts, credit card bills, etc. Avoid paying for business expenses in cash. In general, it’s good to get a separate bank account and maybe a separate credit card to keep all your business expenses in one place.

If You Have a Lot of Freelance Income, Look into an LLC or S-Corp

LLCs and S-Corps require a bit of paperwork and money to open and from a tax perspective are only worth it if you make significant writing income, say at least $75k in 1099 income alone… in which case congrats! But you probably should be talking to a professional and not getting tips from a Substack.   

And that’s all you need to know about writing off what you know.

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Other works I’ve written or co-edited include Upright Beasts (my story collection), Tiny Nightmares (an anthology of horror fiction), and Tiny Crimes (an anthology of crime fiction).