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Saturday, March 4, 2017

It’s Tax Time – Do You Know Where Your Expenses Are?

It you’ve already downloaded and read the Schedule C (Form 1040) and related instructions then you know there are quite a few categories for your writing business expenses.  You should also note that some of those expenses refer to you to additional forms and/or instructions, which means that not all expenses have the same tax treatment.

Of particular note is the difference between an expense such as consumable supplies (generally used up or expended in a year) versus items that last more than a year.  This is a very important concept in the tax code because items that tend to have a long life generally must be depreciated over that expected life.  So, items such as computer systems, furniture, etc., will typically be depreciated and the tax code has charts and classifications to help you figure out the useful life of these items.  For more information, including the charts, see IRS Publication 946, How To Depreciate Property.

Where it becomes a little dicey is when you have an item that can last several years that has a very low cost, such as a stapler or inexpensive software.  What you will need to do in these cases is develop a written policy stating that such items under a certain dollar amount (typically a very low dollar amount) can be expensed, but make sure you read the tax code carefully or consult with a professional to make sure you adhere to any exceptions and stated requirements.  Remember that the tax code, at both the federal and state levels, is written based on laws passed by the legislatures at these respective government levels.

Typical consumable expenses that a writer might incur include paper, toner cartridges, pens, paper clips – you get the idea, don’t you?  Typical items for depreciation include computers, furniture, vehicles (unless you take the standard mileage rate), printers again you get the idea.

There is a mechanism for accelerating that depreciation into the current year or what is referred to as Section 179 but be careful because if you accelerate depreciation, say on an asset that is considered to have a life of five years, but then decide to stop your writing business after only three years, you then have to recoup the depreciation for the two-year difference.  Additionally, any property accelerated under Section 179 must actually qualify as being on the list of eligible property so, again, read everything very carefully and when in doubt consult a professional.


  1. I use excel spread sheets each year for my expenses. I bring one of them up from the year before, change the date for saving it, then see if I incurred expenses for the same items during the new year I'm filing for. I keep all my receipts in a huge folder, separated by what type of expenses, such as writing expenses, or real estate taxes, etc. After I get all my documentation and spread sheets ready, I visit the accountant to figure out the rest.

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