Freelance Writers: Four Business Deductions You Need to Claim
If you work as a freelance writer, you likely fall into the category of independent contractor, and as a result, you are required to lodge your tax return as if you are a business owner. To that end, you must report all of the income you receive, but you are also allowed to deduct expenses from your income. The expenses must be incurred whilst running your business. They cannot be personal expenses.
To help you out, here are four types of expenses you can deduct as a freelance writer:
1. Office incidentals
Do you buy paper to take notes, apps to organize digital notes, stamps to mail manuscripts or other office supplies? If so, you can deduct those expenses as business expenses on your tax return. Remember that the expense must be incurred for business.
For example, if you buy six notebooks and you plan to give five to your kids and use one for work, you can only deduct one as a work expense. Ideally, you should buy the notebooks separately so that you have a single receipt with just your business related expense on it.
2. Electronics such as computers
It isn’t just small purchases that can be counted as business expenses. You can also deduct large business expenses. These are called capital expenses, but you cannot deduct their entire cost in the year of purchase. Rather, you need to deduct the cost incrementally over a period of years.
If you have a small business without a lot of assets, you can write off items that cost less than $1,000 during the year of purchase. This means that if you buy a $900 computer, you may be able to deduct the entire expense right away, but if you buy a $1,100 computer, you may have to deduct it over a period of a few years.
If you travel for work to craft a story, meet with a client or for another reason, you may be able to write off your train, bus or airfare. In some cases, you may also be able to deduct the cost of hotel rooms. Unfortunately, however, you cannot deduct entertainment costs..
4. Accountant’s fees
Figuring out what you can and cannot write off can be tricky, and as a writer, you may prefer to focus on your craft. Luckily, as a business owner, you can typically write off professional fees as part of your business, and that includes accountants’ fees.
An accountant can help you optimise your deductions and organise your finances. Keep in mind, however, if you want to write off accountant’s fees as business expenses, that professional needs to focus on your business rather than your personal finances. If he or she does both, ask him or her to separate the billing so it’s easy to figure out which expenses are business related and which are personal.