We could all do well to follow a passion, even if it is not meant to lead into a lucrative career. Hobbies give us something productive to do with our time and serve as a creative outlet. One may not initially make the connection between a hobby and taxes, but there are cases in which this shouldn’t be overlooked. As your experienced tax experts, Whyte and Associates is dedicated to helping you make the most of your income.
As with a home business and other potential write-offs, the primary concern is sending a red flag to the Internal Revenue Service, triggering an audit. When it comes to a hobby, the distinction needs to be made whether the hobby should be regarded as such, or as a business. A hobby that is pursued solely for pleasure is a hobby, nothing more. A hobby that produces income, however, may be another story.
A hobby cannot be written off as a loss. This is a primary point to deciding how to account for an enjoyable, lucrative activity. Just how much can be written off depends on how much income is earned from the hobby and any other source of income. The math may seem complicated, but what it comes down to is that deductions from hobby income must exceed 2 percent of your adjusted gross income. In some cases, the amount of deductions is not enough to warrant writing them off.
There is more than one way to take advantage of applicable deductions from a hobby. In order to do so, you just need to understand the rules the IRS has set forth regarding hobbies as well as businesses.
The experts at Whyte and Associates have been serving residents ofInland Empire for over fifty years. We have the extensive background as well as the up-to-date education to navigate your various tax needs and potential deductions. If your hobby is an expense, which most are, and it earns you some extra cash, call our office to see how your hobby may be able to save you money on your tax bill. (909) 575-0080.