Taxpayer asks:

Hi, Tax Girl,

With all the electronic sales these days, publishers and authors can promote their books for free for a period of time in order to gain readers and increase their rankings on sites like amazon.com. Even though there is no cost to author or publisher for the free electronic giveaways, can an author take a deduction for the royalties not received by giving away the books?

Thank you.

Taxgirl says:

Promotional expenses are certainly deductible for publishers and authors. To the extent you spend money to promote your books whether through giveaways, contests, or the like, then yes, you can deduct those expenses. This is something that I do for contests and giveaways on my site: I pay for the cost of the books plus shipping for the winners.

That said, you can’t take deductions for promotional expenses that don’t cost you any out of pocket. That includes spending your time to promote the book (important but not deductible) as well as foregone revenue (if you never had it to report, you can’t deduct it).

Silver lining from all of that promotion? You’re not out any cash and you may actually make a few more sales.

Author

Kelly Erb is a tax attorney, tax writer and podcaster.

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