Millions of people enjoy hobbies that are also a source of income. Some examples include stamp and coin collecting, craft making, and horsemanship.<\/p>\n
You must report on your tax return the income you earn from a hobby. The rules for how you report the income and expenses depend on whether the activity is a hobby or a business. There are special rules and limits for deductions you can claim for a hobby. Here are five tax tips you should know about hobbies:<\/p>\n
1.\u00a0Is it a Business or a Hobby?<\/strong>\u00a0 A key feature of a business is that you do it to make a profit. You often engage in a hobby for sport or recreation, not to make a profit. You should consider nine factors<\/a> when you determine whether your activity is a hobby. Make sure to base your determination on all the facts and circumstances of your situation. For more about \u2018not-for-profit\u2019 rules see Publication 535<\/a>, Business Expenses.<\/p>\n 2.\u00a0Allowable Hobby Deductions.<\/strong>\u00a0 Within certain limits, you can usually deduct ordinary and necessary hobby expenses. An ordinary expense is one that is common and accepted for the activity. A necessary expense is one that is appropriate for the activity.<\/p>\n 3.\u00a0Limits on Hobby Expenses.<\/strong>\u00a0 Generally, you can only deduct your hobby expenses up to the amount of hobby income. If your hobby expenses are more than your hobby income, you have a loss from the activity. You can\u2019t deduct the loss from your other income.<\/p>\n 4.\u00a0How to Deduct Hobby Expenses.<\/strong>\u00a0 You must itemize deductions on your tax return in order to deduct hobby expenses. Your expenses may fall into three types of deductions, and special rules apply to each type. See of Publication 535 for the rules about how you claim them on Schedule A<\/a>, Itemized Deductions.<\/p>\n 5.\u00a0Use IRS Free File.\u00a0<\/strong> Hobby rules can be complex and IRS Free File<\/a> can make filing your tax return easier. IRS Free File is available until Oct. 15. If you make $58,000 or less, you can use brand-name tax software. If you earn more, you can use Free File Fillable Forms, an electronic version of IRS paper forms. Free File is available only through the IRS.gov website.<\/p>\n For more on these rules see Publication 535<\/a>. You can get it on IRS.gov or by calling 800-TAX-FORM (800-829-3676).<\/p>\n Additional IRS Resources:<\/strong><\/p>\n Note. From Issue Number: IRS Tax Tip 2014-15. \u00a0Copyright 2014 by Copyright Holder. Reprinted with permission.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":" Issue Number:\u00a0\u00a0\u00a0\u00a0IRS Summertime Tax Tip 2014-15 Inside This Issue Millions of people enjoy hobbies that are also a source of income. Some examples include stamp and coin collecting, craft making, and horsemanship. You must report on your tax return the … Continue reading \n