Tax Deductions for Authors: What You Need to Know

Taxes. The word alone can send shivers down your spine. After all, you chose the writer’s life to get lost in stories, not numbers. But as much as we’d all like to bury our heads in our books, tax season comes around every year, and with it, the need to navigate the often confusing world of deductions.

Luckily, it doesn’t have to be as overwhelming as it seems.

In a recent Speaker Series, we spoke with Ashley Guion, a seasoned CPA who’s walked the tightrope between numbers and novels herself. As both a tax professional and an author, Ashley is uniquely qualified to help us make sense of our tax responsibilities. In this post, we’ll break down her advice, ensuring that when tax season rolls around, you can confidently face those forms without breaking a sweat—or the bank.

The Golden Rule: Separate Your Finances 📊

One of the most important and effective steps you can take to legitimize your author business in the eyes of the IRS is separating your business and personal expenses. Open a dedicated bank account for your author royalties, book sales, and expenses. Not only will this simplify your record-keeping, but it will also help ensure that you don’t miss out on crucial deductions. As Ashley says, “No one remembers what that $36 Amazon purchase was for in January when they’re doing their taxes the following year.”

Maintaining clear financial records will not only make tax time easier but also provide a clearer picture of your business’s financial health throughout the year.

Common Deduction Categories for Authors 📚

Authors, especially self-published ones, can take advantage of a variety of deductions. Here are some key categories to keep in mind:

• Advertising and Marketing: The costs you incur to promote your book—like email promotions (Freebooksy, Bargain Booksy), book launches, Facebook ads, and promotional tools—are all tax-deductible. This includes services like Subscriber Surge Giveaways, book trailers, and even promotional swag you send to influencers or readers.
• Office Supplies and Equipment: Pens, notebooks, your laptop, printers, and even the desk and chair you use in your home office are deductible. If you use them to run your author business, they can be written off.
• Software Expenses: Whether it’s one-time purchases like Atticus for book formatting or monthly expenses like your email marketing service (e.g., Mailchimp, ConvertKit), any software or subscriptions used for your writing business are tax-deductible.
• Contract Labor: Payments to your editor, cover designer, formatter, or anyone else you hire to help with your book qualify as business expenses. Just remember, if you pay any individual contractor over $600 in a year, you need to issue them a 1099-NEC form.
• Travel and Meals: If you attend book conferences, do book tours, or have meetings related to your writing career, a portion of your travel and meal expenses may be deductible. Just make sure the travel is primarily for business purposes.

Understanding the “Three Out of Five” Rule 🤔

You might have heard of the “three out of five” rule, which suggests that if your business doesn’t turn a profit in at least three out of five years, the IRS may consider it a hobby rather than a business. But here’s the truth: the IRS looks at a lot more than just profits when determining if your author work is a business or a hobby. They also consider factors like how much time you spend writing, whether you have a business plan, and if you’re actively seeking ways to improve your profitability.

In other words, don’t panic if you’re not making six figures yet. Focus on growing your writing career with intention, and keep good records to show you’re treating it as a legitimate business.

Home Office Deduction—What Counts? 🏡

Many authors work from home, and the home office deduction can be a valuable way to lower your tax burden. To qualify, the space you claim must be used exclusively for your business. For example, if you have a dedicated office or writing room, you can claim a percentage of your rent or mortgage, utilities, and other household expenses.

To calculate the deduction, determine the square footage of your office in relation to the total square footage of your home. Keep in mind that if your office also doubles as a guest room or a personal space, it won’t qualify.

Don’t Forget About Health Insurance and Retirement Contributions 💼

If writing is your full-time gig and you’re self-employed, you can also deduct the cost of your health insurance premiums, as long as you aren’t eligible for an employer-sponsored plan through a spouse or other job. Additionally, self-employed authors can contribute to SEP IRAs or Solo 401(k)s, which allow you to save for retirement while also reducing your taxable income.

Bookkeeping Tools to Keep You Organized 🛠️

When it comes to managing your income and expenses, automation is your friend. Tools like QuickBooks Online, Xero, and others can help you categorize transactions, track income and expenses, and generate reports for tax time. However, if you’re comfortable with a simple Excel spreadsheet or even a manual tracker, that’s perfectly fine—just be consistent. The key is to keep up with your bookkeeping throughout the year, so you aren’t scrambling come April.

Important Tax Deadlines and Timing ⏰

When it comes to taxes, timing is everything. Missing deadlines can lead to penalties, so it’s important to stay on top of key dates. Here are the essential tax deadlines for self-employed authors to keep in mind:

• January 15: Quarterly Estimated Taxes Due. If you expect to owe $1,000 or more in taxes for the year, you’re required to pay estimated taxes quarterly. January 15 marks the deadline for the final quarterly payment for the previous year.
• January 31: 1099 Forms Due. If you paid contractors (like editors, designers, or formatters) more than $600 in a year, you must issue them a 1099-NEC form by this date.
• April 15: Tax Filing Deadline. This is the big one—the due date for your annual federal and state tax returns (unless it falls on a weekend or holiday, in which case it’s typically the next business day). If you need more time to file, you can request an extension, but any taxes owed are still due by this date.
• June 15: Quarterly Estimated Taxes Due (Q2). Don’t forget to make your second quarterly tax payment if you’re self-employed and required to pay estimated taxes.
• September 15: Quarterly Estimated Taxes Due (Q3).
• October 15: Extended Tax Filing Deadline. If you filed for an extension, this is the last day to submit your tax return.
• December 31: End of Tax Year. Make sure any final business expenses are accounted for by the end of the calendar year to claim them on your taxes.

Final Thoughts: Keep Calm and File On ✍️

Taxes may never be the highlight of your writing career, but they don’t have to be a source of stress either. With a little organization and the right information, you can make the most of the deductions available to you. Whether you’re just starting out or you’re an established author, the key is to stay informed, keep good records, and treat your writing like the business it is.

As Ashley wisely said, “Your time should be spent storytelling, not on bookkeeping.” So get those finances in order, take a deep breath, and get back to what you love—writing the next bestseller!

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