Taxes and Frags

[sen5241b]

If your selling frags out of your tanks can you write everything off on your taxes? The IRS has strict laws on what is a hobby vs. a business. Any precedents on this?

[ReeferMan]

Try it and let us know!

 

 

Hobbies vs. Business

Hobbies are those activities that aren't pursued for profit. If your hobby shows a profit in at least 3 of the last 5 tax years, including the current year, the law assumes you're trying to make money. If you fail the 3-of-5-year test, then it's assumed the activity is a hobby. Either assumption can be overcome with evidence to the contrary.

 

If your activity is a hobby, report your income on line 21, Form 1040. You can't deduct expenses in excess of your income, and you can only deduct qualifying expenses if you itemize deductions. Hobby expenses are among the deductions subject to the 2% of AGI floor. Special ordering rules apply to the deductions you can claim. See IRS Publication 535.

 

Expenses from an activity conducted as a business (that is, for profit) are deductible even if they exceed the income from the business. Report the income and expenses on Schedule C or Schedule C-EZ. Use Schedule F if the activity ia a farm activity.

[Brian Ward]

If your selling frags out of your tanks can you write everything off on your taxes? The IRS has strict laws on what is a hobby vs. a business. Any precedents on this?

 

Watch yourself if you start trying to do this. You'll need a business license - most places have a hobby class license that is less expensive than other places, but while you might be able to write things off on your federal taxes, as well as amortizing expenses, your local jurisdiction (especially since you're in VA) will go after you for property taxes. As a private citizen you only have to pay property taxes on your car and house, but (at least in Va. Beach) as a business you have to pay property tax on the book value of everything the company owns. IMO, not worth it.

 

When I work as an umpire, I get to deduct all my expenses related to umpiring, but only up to the amount of money I earn. I get a 1099 from my association, so I keep track of everything (mileage and equipment) in order to deduct away the money I earned. If you're declaring all the income from selling frags, then you should probably keep track of your equipment and maintenance costs to put down on your Schedule C. If you're not declaring the money from frags, then I wouldn't make things more complicated.

[sen5241b]

You mean you would have to pay county and state property taxes even though you have a hobby class license?!

[CHUBAKAH]

Can I write off all of my losses of fish and coral over the year?

 

I'm thinking that would be huge!

 

lol

[ReeferMan]

You can only deduct your expenses up to the amount of money you earn. Its a wash so its better to not claim any income at all. Now if you could claim a loss that would be a different story

[flowerseller]

Who's selling stuff out of their tanks?

[Brian Ward]

You mean you would have to pay county and state property taxes even though you have a hobby class license?!

 

depends on local laws.

[TROLL]

I recommend for you to check with your accountant or book keeper, they will know more and tell you what is deductible, write-off, exempt, etc. I got all info from my book keeper and went to MD Comptroller to get more information on running business plus taxes. Better check to see what VA law for tax and "home-business." If you really sell a lot then you should be qualified for home business. Business get more tax write-off than hobby, it isn't hard to advance to home business status- few small fees there and fill out registration then you have home business. I strongly suggest for you to research on this matter more deeply and give it a lot consideration.