Can I report book royalty income as self-employment income? Is there an advantage to that, as opposed to reporting it as royalty income?

[dprychit]

I am a professor and textbook author.  In the past I've reported my royalties as self-employment income, and have deducted business expenses from that (home office, computer, etc.).  But that means I have to pay self-employment tax.  Is there an advantage of reporting my income instead as royalty income?  Will I be able to avoid the self-employment tax?  On the other hand, I won't be able to deduct expenses, right?  Which apparently means I have to weigh the one over the other.  Is that correct?

[HelenaC · Accepted solution]

Yes, if you report your Royalties as self-employment income, you have to pay self-employment taxes but you can deduct related expenses. 

You may not have a choice on how to report your Royalties. Please see the definitions below.

Royalty income from your business includes income from natural resources that you extract from your property as well as royalty payments from intellectual property that you created as an inventor, writer, artist, etc. This goes on Schedule C.

Investment income from property you own is for natural resources extracted from your property by a third party who leases your property. It also includes royalties from intellectual property if you didn't create the intellectual property yourself. This will go on Schedule E.

Related Information:

• What is Schedule E?
• What is Schedule C?