The US tax bill that President Trump signed into law just before the holiday is to take effect on Jan. 1 and may have wide-ranging effects on writers. Now is the time to start thinking about what it means for you.
The Authors Guild has written a helpful summary of the changes at their blog; below are key areas that may affect your business:
- Existing pass-through businesses. Often used by authors and freelancers, pass-through entities such as LLCs, sole proprietorships, partnerships, and S corporations will be taxed differently under the new law. Currently, profits from pass-through entities are taxed at an individual rate—which can be as high as 39.6 percent. The new tax bill allows such businesses to deduct 20 percent of business income (thus, you get taxed at 80 percent of your income). However, writers earning more than $157,500 may not receive this new tax break in part or full—there’s considerable confusion and fine print requiring proper interpretation. The Authors Guild is studying this particular issue and will offer guidance in the new year.
- Setting up a new pass-through business. The new tax breaks could motivate writers to set up a pass-through entity if they haven’t already, but the Authors Guild advises that you talk with an accountant before doing so, given the costs involved in creating and maintaining one. Furthermore, high-earning authors may not enjoy pass-through business deductions, as noted above.
- Business expenses. Contrary to rumors you may have heard, independent contractors (those who receive 1099s or similar) can still deduct business expenses, including home office expenses and agent commissions. Only employees (those who receive W2s) are unable to deduct business expenses under the new tax code.
- Student loans and tuition waivers. Student loan interest is still tax deductible, and students will not have to pay taxes on tuition waivers.
Bottom line: Regardless of your income level or business setup, the tax bill is likely to affect you. While it’s still early, we urge you to reach out to your accountant or tax preparer for advice before the end of the year, as you may want to take certain financial steps before 2017 ends—such as giving more to charity, pre-paying property taxes, maxing out deductions that will be taken away in 2018, or delaying some income until 2018 if you’ll be taxed at a lower rate in the future.
Jane Friedman has spent her entire career working in the publishing industry, with a focus on business reporting and author education. Established in 2015, her newsletter The Bottom Line provides nuanced market intelligence to thousands of authors and industry professionals; in 2023, she was named Publishing Commentator of the Year by Digital Book World.
Jane’s expertise regularly features in major media outlets such as The New York Times, The Atlantic, NPR, The Today Show, Wired, The Guardian, Fox News, and BBC. Her book, The Business of Being a Writer, Second Edition (The University of Chicago Press), is used as a classroom text by many writing and publishing degree programs. She reaches thousands through speaking engagements and workshops at diverse venues worldwide, including NYU’s Advanced Publishing Institute, Frankfurt Book Fair, and numerous MFA programs.
