Good: Extended Deadline in the US Bad: We Still Have to Pay

Ugly – sorting out if your writing has reached the point that it is a business and not a hobby (for tax purposes.)

If you have a DBA or are registered as an LLC (in other words, if you are a company already) it’s easy – you are a business, and you can skip the rest of this piece.

For the rest of us, it’s a bit trickier. Here’s one writer’s starting point:

We’re back to this pesky question…

Is Writing a Business or a Hobby?

Answering this question is one of the most important things you can decide for yourself as an author. If your writing is a business, you can write off your expenses; if it’s a hobby you cannot.

Where do you start?

Do a quick “Safe Harbor” check.

The IRS’s Safe-Harbor Rule is how they determine whether you can write off the expenses of your beloved hobby. The rule says to be a “for-profit business, you must produce a positive income for at least three out of every five years.”

Don’t despair if you don’t pass this test. There are still options if you want to “be a business.” And there’s nothing at all wrong with having the IRS see your writing as a hobby if you can afford to absorb those costs yourself.

Best tactic: Diversify.

Don’t put all your eggs in one writing basket. Teach a class, get a paying blog gig, or speak at a writers’ meeting for pay. Set your writer self up as a business and add several income buckets to that business. Perhaps your website audits will offset your self-publishing costs. Perhaps it will be the classes you teach instead, or the manuscripts you edit. You know what your superpowers are.

End Excerpt

The article then goes on to list other ways you can use to determine if you a writer-as-buisness or writer-as-hobby for tax purposes.

Jenny Hansen ends on the most important point – if you are the least bit unsure, ask an accountant. I would add: document, document, document. As in, keep every bit of paper and receipt associated with your writing expenses and incomes, and keep them separate from your personal income and expenses.

The full article:


  1. “And there’s nothing at all wrong with having the IRS see your writing as a hobby if you can afford to absorb those costs yourself.”

    Readers should recall that business expenses, like mortgage interest, are tax *deductions*, not tax *credits*. The deduction only reduces the expense by the percent of your income tax bracket. For example, e.g., I spend $2000 on a new computer. I am in the 35% income tax bracket. The deduction reduces my taxed income by $2000. My tax bill is reduced by $700. The $2000 cost therefore still costs me $1300.

    1. Slightly more if it drops you into the next lower bracket. Had that happen one year as an IT consultant. (IIRC, the difference was about the cost of a decent steakhouse dinner for $SPOUSE$ and I – mid-90s prices.)

  2. OTOH, if you’re spending a bunch of money on software (say, an Adobe subscription…) in order to be able to do covers, even your own, don’t forget to expense it.

  3. If you are missing the “safe harbor” profit test you might look at your business expenses and maybe decide some of them didn’t need to be tagged to the business but could legitimately be considered as another category. Maybe move a convention expense to entertainment?

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