What kind of deductions can a freelance writer working at home make without catching the eye of Internal Revenue Service auditing software? It depends on the writer’s situation, of course, but many writers may be missing out on deductions they can take quite easily and lawfully for fear of being audited. A prevalent myth is that IRS agents are sitting in their offices salivating over a big pile of 1040 forms from freelance writers, just waiting to conduct an audit. The reality is that home office deductions aren’t enough by themselves to trigger an audit. Here are some tips to lessen that auditing potential even more.
1. You CAN depreciate a major gift. Let’s say your parents decided to help you with your job as a freelance writer by buying you a brand new computer with all the whistles and bells and the regular Microsoft Windows daily crashes that require your Norton protection be up to date. You can depreciate the fair market value of that computer over time, but you cannot just write off the entire cost as a home office supply for that year.
2. Use the utilities options on the tax form to the utmost. Let’s say your home office takes up 10% of your entire house. When you receive that bill from the power company that claims you used $200 that month to heat or cool your air, then you legally entitled to claims that $20 was used to heat or cool your office. Multiply that by 12 and put THAT figure into the utilities deduction box on the tax form. Same deal goes with water, home insurance and overall maintenance and repairs.
3. When the maintenance and repair applies directly to a freelancer writer’s home office, 100% can be deducted. This home office deduction even applies to cosmetics. If you buy wallpaper or paint your home office, then you can deduct it. Just make sure to take before and after photographs of the home office to prove WHY it needed a facelift in case an auditor drops by.
4. If you are going to deduct the cost of interviewing over lunch at a fancy restaurant, then you’d better make sure that you use the information given. Business deductions for a freelance writer does include the cost of entertainment, but only if you talk business at some point. If the whistleblower of BP agrees to a lunch with you, but refuses to discuss anything related to BP, then your article should be about how to deal with reluctant whistleblowers. Anything else and the deduction of the pricey meals gets a bit dicey.
5. If your freelance writing careers takes you away from your home office and to another city, you can deduct the cost of getting there and coming back if it’s a train or plane or rental car. Rental cars cost is also deductible for use in another town. The deduction for meals and lodging is deductible, but not for the entire cost.
6. The Republicans’ Contract On America team of ’94 put the kibosh on much of what you can write off if the spouse tags along on a freelance writing trip. You can still write what you spend for business purposes, but Newt, Morning Joe and the gang virtually killed writing off all expenses.