I paid a company $15,000 to self publish a book. My sales were $800 in 2019. Can I deduct the difference?

[DianeC958]

No, the amount you paid for your book to be published becomes inventory since you still have books you can sell.  You can deduct the amount that each book cost that you sold, but the remaining amount you paid for books you still have cannot be deducted until you sell the books.

For example  Beginning Inventory $0 plus Purchases $15,000 minus Ending Inventory $13,000 equals Cost of Goods Sold $2,000.

The Cost of Goods Sold is the only amount you can deduct.

[Deano5634]

OK thanks

actually, this book is print on demand, so there is no inventory, no stack of my books in a warehouse somewhere; have sold three books in 2020, and do not expect to sell anymore; surely, I can write off expenses at a faster pace    ?

[DeanM15]

If there is no inventory of books, then the $15,000 sounds like it is a business expense. This assumes that the 15K fee is not an advance payment to the publisher and that the self-publishing of the book is a business venture. 

If the 15K is an expense you paid to publish the book, and the publishing of the book is a business venture, you can take it on your Schedule C against the income you earned. You will have a loss for 2019.

To enter the Self Employment information into TurboTax:

• While signed in and working in TurboTax
• Click on Federal in the left-hand black menu
• Click on Income and Expenses
• Scroll down and click on Show More next to Self Employment
• Click on Start or Revisit next to Self Employment Income and Expenses

The IRS does differentiate between a business and a hobby. Unfortunately, there is not a bright-line test for the difference. The IRS uses nine factors to make the determination:

• Whether you carry on the activity in a businesslike manner and maintain complete and accurate books and records.
• Whether the time and effort you put into the activity indicate you intend to make it profitable.
• Whether you depend on income from the activity for your livelihood.
• Whether your losses are due to circumstances beyond your control (or are normal in the startup phase of your type of business).
• Whether you change your methods of operation in an attempt to improve profitability.
• Whether you or your advisors have the knowledge needed to carry on the activity as a successful business.
• Whether you were successful in making a profit in similar activities in the past.
• Whether the activity makes a profit in some years and how much profit it makes.
• Whether you can expect to make a future profit from the appreciation of the assets used in the activity.