How to Calculate Taxes for Hobby Expenses & Income
If a hobby results in someone making money, the IRS requires that income to be reported unless the hobby costs more than the income received. Calculate taxes for hobby expenses and income, if the hobby shows a profit, with tips from an accountant in this free video on taxes and finances.
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So the tax season's here, and you've been engaged in this little hobby of yours, and now you want to know how to calculate taxes for hobby expenses and income. Well, first of all, if you are engaged in a hobby, and the hobby resulted in your making money, you're required by the IRS to report that income. But if you're engaged in a hobby, and in fact, your hobby costs you more than the amount of money received for that hobby, you won't be required to report anything to the IRS. And you also will not be allowed to deduct the expenses related to that hobby. Let's take a little example. Let's say you're in the process, and you like carving little wooded ducks. And you spent about one hundred dollars on supplies to make the duck, and you sold the duck for two hundred dollars. One hundred dollars would be taxable. But if you spent a hundred dollars on the duck, and you sold it for eighty dollars, there would be no advantage, no deduction, and no tax advantage for you. Again, hobbies can be taxable if you show a profit. I'm Faye Jone talking about taxes on hobby expenses and income.