The average annual income for a freelance writer in Canada is $24,035. Even worse, that is down from $26,500 a decade ago, according to the Canadian Professional Writers Survey.
The major factor in determining how writers prepare tax returns is whether there is a "reasonable expectation of profit" from your writing. For writing that is deemed by the CRA to not have a "reasonable expectation of profit" (i.e. writing that is undertaken for pleasure instead of profit in their view), any expenses or losses that you incur are not deductible on your income taxes.
What if you hold down a full-time job and do writing on the side? Colleen Stewart, a WGA member, is a full-time nursing instructor and writes magazine articles when she carves out time. In such cases, the profit or loss and expenses that are incurred from writing are added to or deducted from their day job income.
Writers who are fortunate enough to be completely self-employed are trusted by the CRA to file truthful tax returns. Keep a detailed and meticulous list of every expense and all sources of income in case you ever need to justify your claim. Keep all receipts. If you are audited, you will be glad you were diligent.
Expenses Writers Can Deduct on Their Taxes
Self-employed writers are able to claim business expenses and a number of deductions from their gross income. The following is a list of items you may be able to justify as writing business expenses, depending on your writing niche:
- office supplies
- postal and courier expenses
- books relevant to your writing
- newspaper and magazine subscriptions
- membership dues for writing organizations and guilds
- payment to any assistants you may have
- photocopying charges
- advertising and promotion costs
- research materials
- business phone line
- internet
- tape recorders
- computer paper, software, and repairs
- ink cartridges
- bank fees, if you have an account solely for writing
- writing courses
- writing related conventions (two per year limit for deductibility)
Printers and other costly equipment can’t be written off the year they are purchased; such items are considered a capital cost and are written off according to a fixed percentage, usually between 30 and 50 per cent a year. The same goes for office furniture such as desks, filing cabinets, and that $500 ergonomic chair you had to have.
Legit travel expenses can be deducted as well. If you take the train to see your publisher, keep the stub. If you fly to Tuscany to write an article on the newest spa, the price of the plane ticket is a justifiable expense. Keep all receipts as the cost of hotels, transportation, and half of your meal and entertainment expenses are deductible.
If you use your car to go downtown to interview a source or go to a neighbouring province to research their indigenous people, a portion of the vehicular costs are a legit write-off. Keep track of the kilometres that your vehicle is used for writing-related outings and all your car expenses (gas, repairs, maintenance, car loan interest, windshield washer fluid, etc.)
Writers who work from home can claim a fraction of their living space as a write-off. Figure out what percentage of your home is used strictly for writing (where you lay on the sofa in your TV room to dream about the hero in your novel is not considered a writing area unfortunately). You can use that figure, usually between 20 – 30 per cent for most writers, to claim deductions on home insurance, home repairs and maintenance, utility bills, interest on your mortgage, property taxes, and other home expenses.
If you work in an office outside your home that is dedicated solely to your writing, the rent and all bills you pay for the space can be claimed as an expense.
Taxes for a Multi-Year Writing Project
How about if you spend three years writing a novel and get paid in year three? Can you claim some of that as income in past years? The Canada Revenue Agency is clear on this. If you have “concrete evidence”, records of some kind or a publisher’s schedule for example, that enable you to prove you spent three years working on your masterwork, you can claim the portion per year for incomes (i.e. claim 1/3 of the money in each of the three years you worked on the project). If you have no proof or records, you must claim it all as income in the year you got paid. Each case is looked at individually and the CRA suggests if you have any doubts that your concrete evidence is adequate, write a letter asking for a ruling in your case; the easiest thing to do is fax the letter into your local CRA office.
Bad Debts From Writing
What about bad debts from your writing? Colleen Stewart wrote a handful of articles for a luxury magazine and was denied payment despite numerous attempts at collection by herself and others. Stewart used Westside Accounting in Airdrie for her tax needs and Corelene Boland from Westside explains how this works, “Say you invoiced for $100 in 2007 and included it in income but never received payment for it, then you could write it off as an expense in 2008 in the self-employed schedule as a bad debt. There’s a special line on the self-employed schedule for bad debt. If they have not been included in income, there is no claim for an expense because it has never been claimed as income.”
Writers and GST
GST is an area where some writers are unclear on. If you make over $30,000 a year, you must charge all your clients GST. If you make less than 30 grand, it is optional. The only GST exempt groups include clients outside of Canada and federal, provincial, territorial, and municipal government organizations.
If you have any questions, the folks at the Canada Revenue Agency are very helpful. Give the business line (writing is your business after all!) a call at 1.800.959.5525.
Toby Welch - Toby is a full-time freelance writer who specializes in magazine articles, online writing, e-books, and manuscript editing.
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