3 Things To Know About Taxes When You Self-Publish A Book

If you self-publish a print or digital book on a platform such as Amazon or Lulu, it is important to understand how the tax process will work right from the beginning so that you know what expenses to keep track of and how to properly handle your earnings.

Thing #1: You Are Running a Business

The first important thing to understand is if you are selling something, even a digital book, in the eyes of the IRS, you are running a business. Most self-publishing authors are running a business as a sole proprietorship unless you take steps to make a corporation or partnership to sell your books under. As a self-published author, you will be willing out Schedule C, the regular tax form for sole proprietorships, for the income you generated with your ebook.

Thing #2: Keep Track of Your Expenses

Second, as you are running a business, you can deduct your business expenses from your profit, thus reducing your taxable income. In order to deduct your expenses, you need to keep track of them in the first place.

With an ebook, for example, your expenses may include things such as internet bills, proofreading service, book cover creation fees, and costs associated with researching and interviewing people for your book. If you did any marketing of your book, that would be considered a deductible expense as well.

If your losses exceed your income, you can deduct your business loss. If you are also working a traditional W-2 job, this can help offset your overall tax burned for the year.

Thing #3: Self-Employment Tax

If after your expenses are deducted from your profits or royalties, you are going to need to pay the self-employment tax. As a self-employed individual, you are expected to pay both the employee and employer side of the Social Security tax and Medicare tax. You should pay this on a quarterly basis, although if this is your first year as a self-employed individual, you will not face penalties for not paying quarterly taxes.

Thing #4: Check on State & Local Taxes

Your income from your ebook is seen as regular income, so if you live in a state with a state income tax, you are going to have to pay state income taxes on your ebook income. If you live in a state with local income taxes at the county or city level, you are going to want to make sure you meet that tax obligation as well.

When it comes to publishing an ebook, it is important to understand that you are now running a business as a sole proprietorship if you don't have any other business structures set-up. You are going to want to keep track of your expense and remember that you will have to pay taxes on any income you earn that exceeds your expenses.

If you have further questions, reach out to a local tax preparation service.



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