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Earning income from hobbies

Posted by kftaxaccounting2014 on July 25, 2015 in Uncategorized | 0 comment

Do you know there are some hobbies that could earn you income?

A lot of us participate in different hobbies for fun, it could be coin collection, horse breeding, stamping to name a few, but what we do not know is that some of these hobbies could actually contribute to our income, here are some  tax tips to help you if you get income such activities;

Firstly, you should be able to differentiate between a business and hobby, Business is done to make profit whereas hobby is done basically for recreation, fun or sport. But the most important thing is that any income you get from your hobby has to be reported too on your tax return. However, how the income obtained from your hobby is reported is quite different from that of your business. There are special rules and limits for deduction that you can claim for a hobby.

Secondly, you should know the  limit of your expenses, you can only deduct your expenses up to the amount of your hobby income. This means that if the money you spend on a particular activity is more than the money you get back ,then you will bear the loss on your own. You cannot deduct the loss from your other income.

Also, in your tax return, you have to itemize deductions in other to deduct hobby expenses. There are three types of expenses that your cost may fall under, some rules apply as to where your cost fall under.

Lastly, there is a certain limit to the allowable hobby deductions, you should know there is ordinary and necessary hobby expense that may be deducted, Ordinary expense is common and accepted for the activity, whereas the necessary expense is helpful or appropriate but this is guided by some rules.

 

The rules that guides hobby income and how to file it in your tax return can be complex, let the tax experts help you with the complexity, so you can get income from what you enjoy doing.

 

 

Director, Tax and Accounting
Tax Accountant specialized in Tax Accounting, IRS Representation & Resolution of Complex Tax Matters, Individual and Corporate Tax planning, and Tax Advisory Services.

Specialties: Tax Resolution, Tax Planning, Financial Planning and Analysis, Budget Management, Payroll Management, Cost Management and Optimization, SAP, Oracle, Hyperion, PeopleSoft

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