Whether you’re an author, musician, artist or any other kind of content creator, one important thing you need to think about is whether you create as purely a hobby, or if you intend (or hope) to someday make money off of your creations. For many creators, this intent becomes obvious once you’ve decided to go beyond creating for yourself, friends and family and taking the big step into offering your creations to the rest of the world (with an intent to make some money while you’re at it.)rec
If you’ve taken this step, you’re a business – and you need to start acting like one.
To be a creator doesn’t mean you have to be creating a tangible item either. You could be running your own blog, review website, etc. – and if you are doing it with the intent to make money – and even if you’re not currently making a profit or doing it full-time – you need to treat it as a business. And, during this time of the year, that means claiming all of your expenses in your tax return.
During my college days I launched and ran Music-Critic.com (I sold it years ago now) – and I ran it as a business. The fact of the matter is that if you’re going to make any money from a venture, you have to pay income tax on that money. This is why you are required to supply your tax ID or Social Security number when you sign up for affiliate programs, Google AdSense, publishing through sites like Lulu.com, and any other instance where an entity is going to be sending you a check. At the end of the year, if they’ve sent you any money, they’re also going to send you your tax information – which you are required to include in your tax filing.
But whether or not you actually did make any money in the first year or two doesn’t mean you’re not running a business. If you honestly are attempting to make a profit from whatever you are doing (in my current instance, writing a book), then you need to start treating this venture as a business now. Beyond the mindest that running a business requires (seriousness, professionalism, etc.), you also need to run it right financially. And again, at this time of the year, it means writing off any expenses you put into it in the previous year.
The following are some examples of things that you should be deducting. Keep in mind that in all instances the primary use must be for your business though. Also, it is highly recommended that you keep any and all receipts and documentation you can, should you ever be audited.
- New Computer
- Software (Photoshop, Microsoft Office, etc.)
- Mileage Driven for Business
- Postage and Shipping Materials
- Review Copies
- Advertising Costs
- Real Estate for Home Office
- Internet Access Fees
- Stock Photography or Videos
- Web Hosting
- Conference Fees
- Consulting Fees
Of course there are many more items you can claim – basically, if you spent money for your project, claim it. Eventually you need to be making a profit on the business, but like any business, the first few years are likely to cost you more than you earn. Over time, if you’re doing things right, you’ll start to make a profit. If not, then you’re going to have to stop filing the expenses for it in your taxes though, as it will be questionable as to whether it really is a business or a hobby.
For all of this, if you have questions, definitely talk to a tax professional. They can help you out, and are well worth the cost. This year I went from owing several thousand dollars to getting a refund of several thousand dollars – all due to the fact that I claimed my deductions where they were due.
One final tip: do not cheat on your taxes. There are plenty of absolutely legitimate ways you can save on taxes at the end of the year simply by doing what you are supposed to do.