Taxes & using your "hobby" as a tax deduction...

[luv4chance]

I was told you can do this...which wud include any hobby...

Anybody know anything about this?

[WashingtonBay]

It's usually a bad idea that will get you an audit. ;)

[mare]

So will calling your horse hobby a business. The IRS can tell pretty well. Seen it happen to a couple near here.

[vicklynn]

http://www.irs.gov/publications/p535/ch01.html#d0e202

[JennyandJosey]

You can only deduct hobby expenses up to any income you receive. So if you receive income from your horse that needs to be reported then you can deduct any expenses related to it only up the income your receive. In other words, it would end up being a wash. I've been doing taxes for a few years now (but am no CPA) and do not believe you can deduct hobby expenses on their own.

The best example may be if you sell a horse for a large enough sum that needs to be reported as income you can then deduct expenses up to the sale price.

Again, I am not a CPA, but this has always been my understanding of hobby expenses.

[vicklynn]

Well that link got messed up. Not sure how that one came up, I never went there, I was in the hobby area.
Funny you asked about Hobby and IRS, I was looking at it just the day before...lol

http://www.irs.gov/newsroom/article/0,,id=172833,00.html

[luv4chance]

That's kinda what I thought. Too good to be true ;)

[42many]

Jenny is right on - you can deduct hobby expenses only up to hobby income.

Doing that isn't a big deal - where the big deal comes in is people who are in a hobby trying to call it a business. Then, they attempt to deduct way over their income as a business loss - and THAT is where the audits and IRS issues come in. There is a huge audit risk involved when you run a business at a loss for years in a row - at that point, you have to be able to convince them that it IS a legitimate business run with a profit motive (even though no profit is being made) rather than a hobby.