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I am a married resident of MA and pay income tax on my 200K

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plus salary. I am...
I am a married resident of MA and pay income tax on my 200K plus salary. I am thinking of writing a book and have been promised royalties in the range of 60K to 80K. What could I do to reduce or defer income taxes on these royalties?
Submitted: 7 years ago.Category: Tax
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8/2/2010
Tax Professional: Robin D., Senior Tax Advisor 4 replied 7 years ago
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 16,192
Experience: 15years with H & R Block. Divisional leader, Instructor
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HelloCustomer

if you are in business as a self-employed artist, author, photographer or inventor, and the royalties relate to a self-created copyright, trademark, or patent, you would report the payments as part of your business income on Schedule C. The payments can not be deferred from income tax but by keeping track of your expenses you could surely reduce the tax.

Most expenditures can be classified into the following categories:

 

  1. Travel, transportation, and entertainment;
  2. Supplies, materials, home office, etc.;
  3. Copyright fees;
  4. Art work, typing, indexing, etc.,
  5. Printing, advertising, and distributing the literary effort.
  6. Entry fees for contests.
  7. Editing fees.
  8. Home office.
  9. Depreciation (e.g., home office, computer).

A writer may claim as deductions from adjusted gross income the cost of supplies used in his or her writing research activities, dues to writers' societies, and subscriptions to writing journals and newspapers. Subscriptions for one year or less are deductible immediately.

Amounts paid for books, furniture, and professional instruments and equipment, the useful life of which is short, may be deducted. If the useful life is not short, the items must be depreciated. It may be necessary for an author to attend professional conventions and conferences. Unreimbursed expenditures for transportation, including meals and lodging if away from home overnight, incurred in attending most such meetings are deductible from adjusted gross income . Only 50% of meals are deductible.

 

Unless the royalty is a loan it is income and you will need to keep receipts and all information about your costs so you can show the proper amount for tax.

 

I sincerely XXXXX XXXXX information is helpful,

Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 16,192
Experience: 15years with H & R Block. Divisional leader, Instructor
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