wresting back money from the US government

In the US, in the State of Illinois, the answer is yes, or at least it was the last time I bought a laptop. (But I'm not a tax consultant and don't pretend to be one and these things do change.)

I did the very same thing a few years ago - Schedule C before anything sold. But tax law changes - why not call the IRS hotline & ask?

I do it every year - I take paper, printer cartridges, a portion of my internet fee, computer. You might even be able to deduct your workspace as home office, but I'm not entirely sure how that works. It's all legitimate business expense, even if you haven't sold the book yet.

It's the Business vs Hobby issue that you have to worry about. Eventually you have to start making a profit (usually at least 3 out of 5 years) or you will not be considered as pursuing a business. More on the concept and some of the criteria here:

http://www.irs.gov/businesses/small/article/0,,id=99239,00.html

If you deduct your workspace, then you have additional tax issues when you move. DO NOT do this. The rest of the advice is sound (I just did a ton of research on this particular topic )

WildScribe said:

If you deduct your workspace, then you have additional tax issues when you move. DO NOT do this. The rest of the advice is sound (I just did a ton of research on this particular topic )

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This isn't necessarily true. It depends on a lot of things, the biggest of which is whether you rent or own. Even for owners, deducting a home office is a bad deal for some, and a wonderful deal for others. You have to know the individual's tax situation inside and out to know which is which.

But it's usually pretty easy to determine in advance, if you know enough about taxes, or if you're willing to visit an accountant.

Those tax issues can work against one person, and for another.

WildScribe said:

If you deduct your workspace, then you have additional tax issues when you move. DO NOT do this. The rest of the advice is sound (I just did a ton of research on this particular topic )

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There are probably valid reasons for doing it and not doing it. I would hazard that it is an individual choice that each of us must make.

Since you have done the research and come down firmly on the side of not using this tax break, perhaps you could explain your rationale so others could make a more informed decision according to their own circumstances?

RLB said:

I am in the process of filing my taxes and just had a quick question (or if the answer is not simple- can anyone recommend a good book for it?).

I quit my job last year to write a novel full time. I bought a laptop for the purpose and saved receipts for SASEs, postage, paper, etc.

Can I file a schedule C or deduct these things even if I haven't yet sold the novel? (I did make $100 for a non fiction short, but that's all the writing income) Or do I wait until (crossed fingers) the novel sells and deduct these things another year... or not at all?

Thanks!

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The short answer is that you can deduct almost any expense whether you make a profit or not, but some are taken all at once, and some are supposed to be taken over several years, usually over five years.

And if you use your computer for anything other than writing, even personal e-mail or playing online games, an audit may get you in serious hot water. Odds are you won't be audited, but it's a risky chance to take because fines can be massive. The only completely safe way to deduct a computer is to have a specific computer you use exclusively for writing.

Same with the internet. This, too, is a risky deduction because darned few use it solely for writing, and an audit can show this.

There's more than one level of auditing, and you may get lucky, but if the IRS even suspects you owe them money, they can and do go through your computer to see how it, and the internet, is used. I've had it happen.

As someone suggested, the best way to get the right answer is to call the IRS and ask, or to talk to a tax accountant.