Gaming Books as a Business Expense?

[Ulrick]

This question goes to all the people who run d20/gaming businesses out there.

Can you write off gaming books as a business expense? I mean, you have to "research" the market right so you can find a niche...

OR

If you're a d20 publisher, you have to buy the PHB, DMG, and MM so you'll know the rules system so you can create a quality product, right?

 

[Bloodstone Press]

Yes you can write-off books, miniatures, trips to cons, and even the snacks you buy for gaming and the gas you use to drive to the game.

In reality, most small d20 publishers don't even earn enough money to qualify for filing taxes. I believe if your business earns less than $4,000 a year, you don't even have to file federal income tax. Bloodstone fell into that category the first two years it was in business.

(note, I'm not an accountant, but I know one who tells me these things).

 

[Michelle Lyons]

Of course. The thing about it, though, is that it must actually be a business, and not some pseudo-business that you cooked up to deduct your game stuff. If this is not obvious from sources of income and what not, your odds of flagging an audit are much higher.

 

[cignus_pfaccari]

Of course. The thing about it, though, is that it must actually be a business, and not some pseudo-business that you cooked up to deduct your game stuff. If this is not obvious from sources of income and what not, your odds of flagging an audit are much higher.

I once saw a guy's 1040EZ form where he stated his occupation was "gamer." I assume that he made his living off of CCG tournaments.

Brad

 

[mearls]

Those two cases of Aberrations boosters I pre-ordered? Business expense - I need to play the game and study the minis to write Under Command articles for Dragon.

Tickets to the opening day, all three LOTR movies shown at once event? Business expense - I need to keep on top of fantasy in pop culture to do my job. Plus, I did work on the LOTR RPG line.

One copy of every single D&D 3 book that WotC's done? Business expense - I need to keep on top of the market.

Cell phone? Business expense - I write mobile game reviews for CNet.

And so on, and so forth. Of course, they get you back with that self-employment tax, but it is nice to have lots of stuff to deduct.

 

[Samothdm]

Obviously Mike Mearls is a super reliable source for this so I'm sure what he says is true.

For my own self, I've only ever written and published one d20 book (see my sig) but it took FOREVER to get published. For two years I deducted lots of my d20 purchases as well as a science-fiction writing class I took and a lot of reference books I purchased as well as portions of my monthly internet fees for doing online research and such.

However, I don't write off every single D&D/d20 purchase. Maybe I'm too conserative. Basically, I'm working on 3 projects right now. Each has a particular "theme" to it, so I only write off the books that relate to that particular theme.

Example, if I were writing Quintessential Aristocrat today, I would feel justified in writing off purchases of Green Ronin's Noble's Handbook, Mongoose's Power Classes: Noble, the Unlikely Heroes: Noble PDF, and any other product that had a noble-type class in it (Star Wars comes to find, as well as AEG's [/i]Swashbuckling Adventures[/i], etc.). I would probably also feel justified in writing off Mongoose's entire line of Quintessential books to make sure that I didn't do anything in my book that had already been done before in their books.

As it was, when I got around to writing Quintessential Aristocrat, I'd already bought a lot of the Quintessential series for my own reading and game play and it was a different tax year, so I didn't get to write those off. A lot of those other products weren't out yet, so obviously I didn't have them. Most of my write-offs that year were actual nonfiction history books that I used as research.

So, this year, while I did buy the Eberron Campaign Setting, I don't feel like I can write that off because I'm not sure it's 100% related to my game writing. It's something I would have bought anyway, even if I weren't a writer. That's kind of my acid test: Would I have bought the book anyway? Using that test, sometimes I write off a portion of a book for "research".

Never thought about writing off movies and DVDs, though... that's a good point.

Don't forget things like your computer (amoritized over time), modem, ISP fees, etc. I imagine you could justify writing off your Dragon and Dungeon subscription prices as "trade publications". As an ad guy, I get to write off pretty much every magazine and my cable bill as "ad research" so I don't see why you couldn't do the same as a game writer.

 

[tf360]

In order to deduct expenses, you will need to demonstrate that game designing is an actual business and not a hobby. That means that you will need to show that you are game designing with the purpose of making a profit rather than using game designing as a vehicle for writing off what would otherwise be personal expenses, such as books, magazines, etc. This is a very important distinction and as usual, not always black and white. The following (from the IRS website) should provide you some guidance in making this determination.

"Is it a Business or a Hobby?

It is generally accepted that people prefer to make a living doing something they like. A hobby is an activity for which you do not expect to make a profit. If you do not carry on your business or investment activity to make a profit, there is a limit on the deductions you can take.

You must include on your return income from an activity from which you do not expect to make a profit. An example of this type of activity is a hobby or a farm you operate mostly for recreation and pleasure. You cannot use a loss from the activity to offset other income. Activities you do as a hobby, or mainly for sport or recreation, come under this limit. So does an investment activity intended only to produce tax losses for the investors.

The limit on not-for-profit losses applies to individuals, partnerships, estates trusts, and S corporations. For additional information on these entities, refer to business structures. It does not apply to corporations other than S corporations.

In determining whether you are carrying on an activity for profit, all the facts are taken into account. No one factor alone is decisive. Among the factors to consider are whether:

You carry on the activity in a business-like manner,
The time and effort you put into the activity indicate you intend to make it profitable,
You depend on income from the activity for your livelihood,
Your losses are due to circumstances beyond your control (or are normal in the start-up phase of your type of business),
You change your methods of operation in an attempt to improve profitability,
You, or your advisors, have the knowledge needed to carry on the activity as a successful business,
You were successful in making a profit in similar activities in the past,
The activity makes a profit in some years and the amount of profit it makes, and
You can expect to make a future profit from the appreciation of the assets used in the activity."

 

[Ulrick]

Thank you for all the advice.

I've been seriously considering starting up my own gaming company.

Of course, I'm going to do some more research. But I really appreciate the advice here. The last thing I want is the IRS saying "Why did you write off the Monster Manual as a business expense?" I might take it a step further and form a corporation. That way it'll show the IRS that I do intend to make money.

If I do start a gaming company, I definitely intend to make it profitable business. But I also won't quit my day job.

Thanks again.

 

[CarlZog]

I once saw a guy's 1040EZ form where he stated his occupation was "gamer." I assume that he made his living off of CCG tournaments.

Brad

Maybe, but I've also seen the terms "gaming" and "gamer" used by the casino industry and professional gamblers!

zog

 

[Keeper of Secrets]

Thank you for all the advice.

I've been seriously considering starting up my own gaming company.

Of course, I'm going to do some more research. But I really appreciate the advice here. The last thing I want is the IRS saying "Why did you write off the Monster Manual as a business expense?" I might take it a step further and form a corporation. That way it'll show the IRS that I do intend to make money.

If I do start a gaming company, I definitely intend to make it profitable business. But I also won't quit my day job.

Thanks again.

From everything I have heard - don't. I mean don't do it just for the 'write off' scam. You'll end up losing so much money at first. If you want to 'get into the industry' there are a lot more ways to do it that do not involve losing a lot of money.