I'm going with self publishing. So....the book is done. Yay!!! Now......the expenses. I have to hire an editor and a cover artist to design the cover. I'm sure there will be others but for now.... I was wondering, are these expenses tax deductible against my income/revenue? I'm Canadian so it's probably best to ask a Canadian accountant but they're not free and right now is a horrible time to ask as it is tax season so I wondered if anyone in here had any insight....? Many thanks!!!
I am not Canadian, so I obviously can't comment on Canadian tax law specifically. I think the fundamental question is whether you are writing as a hobby or as a business. I'm in the U.S. 2021 was my first year with being a self-published author. I started a separate ledger to track income and expenses from the publishing "business." For 2021 I had some sales income but the expenses over shadowed the income, primarily because of the cost of purchasing a large block if ISBNs after having used up the initial block of ten. I also paid for two cover designs and bought the rights to a photo for a third cover. I treated all those expenses as business expenses, so for 2021 my writing/publishing business lost money. Under U.S. tax law, if I lose money at it for two (??) more consecutive years, the IRS will determine that it's a hobby rather than a business and then I won't be able to deduct such expenses unless and until I can show a couple of years showing a net profit. It can't hurt to keep track of the income and expenses, and then decide at tax time if the expenses qualify as business deductions under Canadian law. The good news for you is that ISBNs are free for Canadians.
The above response basically covers it. I’m in the U.S. as well, and know the IRS considers the difference between a business or hobby initially on factors like record keeping, action taken to optimize revenue, and intent to make a profit. I think for the U.S. if you declare a loss for three out of five years they’ll classify it as a hobby. Looks like it’s similar in Canada. Check with your taxman. Most likely you can deduct them if you treat it like a business. Keep good records.
