Tax question... I have a completed WIP and have incurred or am about to incur expenses for editing, preparation, ink & paper, research materials, forums I attend etc. I have a day job and income, but nothing in the way of an advance for anyone yet. Has anyone attempted to deduct writing expenses ahead of income, and if so, how?
If I Google startup cost tax deductions I get some information. It sounds like you need to treat the enterprise as a small business, and you only get to write it off from business profits, later, when you have some.
The details here are likely to depend on where you live, I think? Different places have different tax laws. Though I think what @ChickenFreak said is accurate for the UK.
I think you are out of luck. The IRS would treat this as a hobby, not a business. Educational expenses, like attending a forum, are not a business deduction unless they are required by an employer or for retaining a license. Paper, printer ink, even the printer itsel only become business expenses if you can show that you are running a writing business that is generating revenue, not merely incurring expenses. Besides, unless you are in a very high tax bracket you likely wouldn't stand to save huge amounts of cash anyway. Nice try, though.
Some Googling suggests that in the US, you can deduct hobby expenses from hobby income, but that that deduction doesn't cross a year boundary, and there's other unpleasantness that may make the deduction worthless. http://www.nolo.com/legal-encyclopedia/can-you-deduct-your-expenses-from-hobby.html So, Lew, if you expect to make any money from this book next year, it looks like it might be wiser to hold off on those expenses until January. But just in case you make a profit and can successfully argue that your book-writing is a business, it would probably be best to hang on to documentation of this year's expenses.
This is definitely going to depend on jurisdiction. For example, in Canada, as I understand it, you can deduct expenses as long as you have a reasonable expectation of eventually making a profit. I know Canadian writers who are very careful to keep track of the time and effort they spend on writing as a way to prove that they're trying to make it profitable, eventually. So you'll want to check local laws, for sure.
Sounds pretty much like I expected, no income, no deductions.... Could we try job-hunting expense? ha ha ha
I live in the UK. Before I had made any money from writing I treated the expenses associated with it as I would the expenses associated with any other hobby, and absorbed them myself. Once I started earning more and registered as self-employed, I then deducted expenses as normal. I don't think there's any legal way you can deduct expenses before you've made any money to deduct them from, I'm afraid.
