You’ve done it. After months—maybe even years—of dedication and an encounter or two with writer’s block, you’ve finished your eBook. You've heard that self-publishing for Amazon’s Kindle is a breeze, so you go to their website and click “submit.” Within a day or so, your eBook is available for purchase. Just like the self-publishing process, reporting eBook profits to the IRS is just as simple if you know what to do.
Make Sure You Have a Tax ID Number
Before you make your eBook available to the public, make sure you have a tax identification number. If you have a Social Security number, you’re good to go. If you don’t live in the U.S., you’ll need either a:
Your country must also have a tax treaty with the U.S. If you don’t get a Tax ID number, Amazon will typically withhold 30% of your eBook proceeds for U.S. taxes.
When It’s Time to File
Usually, Amazon won’t withhold any of your eBook’s earnings if you have a tax ID or Social Security number, so you’re personally responsible for paying what you owe to the IRS.
The IRS considers writers to be small business owners, so you report earnings on Schedule C. Take deductions from this income on Schedule C for expenses you incurred while writing your book.
Tax deductions reduce the amount of income on which you’ll owe taxes. For example, if your book earned $15,000 this year in royalties, but you spent $3,000 this year to produce it, you would only have to pay taxes on $12,000 of that income. For example:
- $15,000 in royalties
- Minus $500 for Internet services
- Minus $500 in travel expenses
- Minus $2,000 in interview expenses
- $15,000 – $3,000 in expenses = $12,000 in book income
You may also have to pay self-employment tax on this income if you earned $400 or more after expenses.
If your eBook is a one-shot deal—in that you don’t intend to make a career out of writing—instead of using Schedule C, you can report any royalties earned onSchedule E. Report your earnings this way, if your writing isn’t an ongoing small business. Whether you use Schedule C or Schedule E, the resulting calculation is then transferred to Form 1040.
A Loss Can Offset Other Income
If, after completing Schedule C, you realize that you spent more this year producing your book than it has earned, you likely have a business loss. You can typically deduct this loss from other sources of income—such as other work—reducing the amount you must pay taxes on.
You may have to prove to the IRS that your writing is a business, not a hobby. Your writing may be considered a business by the IRS if you:
- Treat your writing like a business, because you expect to make money from it
- Actively pursue deals with other publishers
- Keep detailed records regarding what you spent and what you earned, including receipts for expenses and royalty statements
Kindle Singles Are Treated the Same as Kindle Direct Publishing eBooks
If you publish a Kindle Single, the same tax rules apply. The only difference is that under Amazon rules, Singles are shorter—no more than 30,000 words.
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FAQs
Royalty payments for eBook sales on Amazon.com and print book sales on Amazon.com, Amazon.co.jp, Amazon.com.au, and Amazon.ca are subject to 30% US tax withholding, including payments from the KDP Select Global Fund.
What is a KDP tax interview? ›
tax regulations require Amazon to collect information about the tax status of content providers under U.S. law. The tax interview guides you through a step-by-step process and gathers all necessary information required to establish your tax identity and generate a Form W-8.
How do taxes work with self-publishing? ›
You probably won't have to pay taxes on all of the income you earn from writing. As a self-employed freelance writer, you'll complete Schedule C to arrive at your taxable income. Use Schedule C to list your income and business expenses.
Do you need a tax ID to sell on Amazon KDP? ›
The short answer: yes. Amazon requires all publishers, including nonprofit or tax-exempt organizations, to provide valid taxpayer identification in order to comply with U.S. tax reporting regulations.
What is the 10% rule for KDP? ›
The 10% rule, in essence, emphasizes the importance of engaging readers within the first 10% of your Kindle eBook. This rule stems from the reality that readers, inundated with countless options, often make swift decisions about whether to continue reading or move on to the next book.
How to pay taxes on eBooks? ›
Your sale of electronic data products such as software, data, digital books (eBooks), mobile applications, and digital images are generally not taxable when you transmit the data to your customer over the Internet.
Where are KDP tax forms? ›
How do I get my forms? You can download your tax forms from your KDP account or taxcentral.amazon.com. In some cases, such as if you live outside the United States or if you have different tax statuses between accounts, we'll issue multiple forms. We'll email you once they're available.
Do you need a business license for Amazon KDP? ›
Kindle Direct Publishing (KDP) allows you to self-publish eBooks or other types of books for free. With this option, you can list on Amazon the books you've written yourself or those you own the rights for. As a rule, you do not need a business license to sell Kindle books since you sell them on the Amazon marketplace.
Is KDP passive income? ›
If you're an aspiring author or have a knack for writing, Kindle Direct Publishing (KDP) offers an excellent platform to generate passive income.
Why did I get a 1099-MISC from Amazon? ›
Form 1099-MISC is issued to U.S. video providers or businesses that received global royalty payments of at least $10 across all Amazon business accounts in the previous year. These forms are issued by January 31 (or the next business day).
Under U.S. copyright law, your self published work is protected as soon as you put the pen to paper. Copyright is based on your creative authorship and is not dependent on any formal agreement with a book publisher or self publishing company, although registration with the U.S. Copyright Office is beneficial.
Are kindle books taxed? ›
Let's say I was buying a $9.99 e-book in California. I'm going to keep this simple and go with the base state tax rate of 8.25% (although it can be higher in some places. I'm now going to be charged $10.81 for the book on my credit card.
Can you live off self-publishing? ›
Yes is the answer. Self-publishing can definitely be profitable. If that was all you needed to hear before buckling down and finishing that book you've been meaning to write, great—see you in a bit. If, on the other hand, you're looking for a more elaborate answer, keep reading.
How do I get rid of sales tax on Amazon? ›
All exemption-eligible items contain a link to remove sales tax. Look for the link Tax Exemption Applied or Tax Exemption Available in checkout to update the tax exemption for that item.
How do I change my tax settings on Amazon? ›
Step 1 Open the merchant console. Step 2 Choose Settings, and then Taxes. Step 3 Choose Manage locations & overrides. Step 4 Select Change tax rate for a Location.
