Offsetting cost of this hobby...microstock?

Started Feb 1, 2013 | Discussions thread
BobSC
Veteran MemberPosts: 3,292
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Re: Offsetting cost of this hobby...microstock?
In reply to virtualkyr, Feb 1, 2013

virtualkyr wrote:

If you can find things you can do to earn money at your hobby, then a lucrative world of tax breaks awaits at your door, which can be a good thing.

Check with a legit CPA to make sure you're doing things the right way.

In the USA things aren't too difficult. You just file a Schedule C. If you use any of the popular tax preparation software it walks you through the process. My wife's teaches music lessons and performs for money so I do the Schedule C. It locks you into that software though, because once you set up depreciation schedules you don't want to translate them to some other software. I had to do that when we stopped using a tax preparer and started using "the box."
You can write off all sorts of things. In her case file cabinets, instrument parts, repairs, cases.. You can write off mileage, and portions of lodging and meals. It's a little more aggressive, but if you have space dedicated to your small business in your house you can deduct that too.
I've been told that so long as you earn more than you deduct you're generally safer, as far as audit flags. We don't deduct the portion of our house that my wife uses exclusively for her business, even though it is substantial, because then we would show losses every year. We might get away with it, but the potential downside is too big and I'm too risk averse.
If you don't make so much money that it makes sense to do all the record keeping (my own musical hobby brings in a few $100 a year, but the expenses are much greater) you can offset hobby related income with expenses. Technically you're supposed to show the income and the expenses on your 1040, but I just keep all the receipts. I wouldn't have any difficulty showing that I spent way, way more than I brought in.

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