Deducting Hobby Expenses: ThinkBusiness
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Hobbies are a great way tospend the
other 8 hours
, butthey are terrible from a taxperspective. Why? You are notallowed to deduct hobbyexpenses for tax purposes. Thismakes sense. If you coulddeduct hobby expenses almosteverything would be deductible-- trips to the zoo, yoursubscription to
magazine, and even thatnew digital camera you've had your eye on. If it's a hobby expense,the
says NO. But is there a way to legally deduct thoseexpenses and many more? The IRS says YES. Stop thinking hobbyand start thinking business...Hobby expenses are not deductible, but if you can turn yourphotography hobby into a legitimate business, you can deduct thezoo tickets, magazine subscription, camera, and much more. Let'stake this slow because you don't want to take deductions for whichyou do not qualify.
Three rules for deducting expenses:
Expenses must be for a trade or business.
Okay, but whatmakes something a trade or business? The IRS says "an activityqualifies as a business if it is carried on with the reasonableexpectation of earning a profit." The last part is important. Theremust be a reasonable expectation of earning a profit. That meansthere must be a good chance you'll make more money with yourventure than you spend. According to this definition, my four yearold's lemonade stand may be more of a business than, say, the