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Is Horse Ownership a "Hobby Expense"?

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  • Is Horse Ownership a "Hobby Expense"?

    I just noticed a hobby tax on my return. It says the meaning of Hobby Expenses are: Amounts you paid in connection with your hobby that you do more for enjoyment than as a job. These expenses are deductible to the extent of the taxable hobby income you report.

    Does this mean that boarding my horse, vet bills and feed can be included? I do not consider it a business nor does the definition say it is for a business. So am I good to go once I get all my expenses together?

  • #2
    Not a tax professional but your answer is in your post: to the extent you have hobby related income to report.

    So, what income are you deriving from your hobby?

    Comment


    • #3
      I'm not a tax professional either - so you'd have to talk to one - but I know that after a certain amount of time of not showing a profit at a "business" it becomes a "hobby". I think it's 3 years? After that, you can't show a loss in your "business(hobby)" to offset other income and avoid taxes. So my non-tax professional read of that clause is if you have income you can deduct expenses to make it zero, but not take a loss.

      But really, I'd ask a pro.
      If you don't like something, change it. If you can't change it, change your attitude.
      ~ Maya Angelou

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      • #4
        Not a pro either, so skip this post.

        But I'd go nuts and contribute far less to the GNP if I didn't have horses in my life.

        Some people need dialysis to survive. I need a daily dose of soft horse nose. Comparable, no?
        The armchair saddler
        Politically Pro-Cat

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        • #5
          What this means is that if you spend $1000 on a hobby and make $750 from that hobby (selling stuff, prize money, etc.) then you report the $750 as income from the hobby and can deduct $750 of your expenses. The remaining $250 is a personal expense and is not deductable.

          Under this rule at no time may deductions exceed income. If you didn't make anything, then you can't deduct anything.

          You must keep receipts appropriate to amounts reported and claimed.

          G.
          Mangalarga Marchador: Uma Raça, Uma Paixão

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          • #6
            In most cases horses are an expense rarely do they generate income unless you are quite good or create a side business derived from your passion.
            Horse Gifts
            Dog Gifts

            Comment


            • #7
              Guilherme, you gave the best explanation as my little brain can understand it but i'm still a little confused. How can I drive income from something I consider a hobby? I don't make any money off of my hobby, hence, not a business. It says "Amounts you paid in connection with your hobby that you do more for enjoyment than as a job." I do this totally for enjoyment and make no profit from it. So I can deduct it as an expense and not report it as income since there is no income? By the way, is your name Portuguese?

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              • #8
                No - you can only deduct expenses equal to income that you receive. So if you give a weekly lesson to a neighbor kid and they give you $10 a ride, you can deduct $520 worth of expenses to offset the $520 worth of income you received. If you spend $3,000 in boarding for the horse your neighbor kid takes a lesson on, you can still only deduct the $520 of expenses that matches the income. If you don't make any income - no lessons, prize money, etc - then you can't deduct any expenses.
                If you don't like something, change it. If you can't change it, change your attitude.
                ~ Maya Angelou

                Comment


                • #9
                  Okay, now I got it. I really appreciate it it. Thanks Tif!

                  Selma

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                  • #10
                    If you have no income from the hobby, you can't deduct expenses.

                    To give you an example:
                    I just took up soap-making. If I go to a craft show and sell some of it, I can deduct the cost of my supplies to offset the income from selling it. But if I just use it for presents and personal use, I can't deduct anything because I have derived no income to offset.
                    'Computers are useless. They can only give you answers.'
                    - Pablo Picasso

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                    • #11
                      Disclaimer: Not a tax professional- don't rely on any of this. What I get from the definition posted is that you can offset hobby income with hobby expenses.

                      If you breed as a hobby and sell a foal- you are supposed to report that as income. Let's say your total hobby expenses (breeding, vet, etc.) are $20k per year, two different scenarios: (1) you sell the foal for $30k, in which case you have 30k of hobby income, and 20k of hobby expenses, so you recognize a 10k profit from your hobby as income; (2) you sell the foal for $1k, in which case you have $1k of hobby income and $20k of hobby expenses, in which case you have a hobby loss of $19k. AFAIK, you can't deduct hobby losses from anything other than hobby profits- so its not like you can use that to offset income you made at your job. Your tax professional may be able to help you use it in future years if your hobby profits. There are rules about how far into the future you can use old losses.

                      Same thing is true if you have competition winnings, it counts as hobby income, but you can offset your expenses against it.

                      These are the situations where the free online tax programs just can't match someone who knows the tax code.

                      Comment


                      • #12
                        If I was to add my horses into the Hobby category on my taxes I would be audited

                        Comment


                        • #13
                          The deal is you are supposed to report every penny you receive from anything as income. If you are audited they get a little excited about unreported income. In the instructions you are supposed to report income from illegal activities - such as embezzlement.

                          If your horse wins prize money you are supposed to report it, you sell one, you are supposed to report it, but for the hobby category you would offset any income with expenses related to that income up to the amount of income.

                          Comment


                          • #14
                            Originally posted by Seal Harbor View Post
                            ... they get a little excited about unreported income. In the instructions you are supposed to report income from illegal activities - such as embezzlement.
                            Which just goes to show how utterly, irrevocably STUPID our lawmakers are.

                            Comment

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