To enter hobby income and expenses in TurboTax please follow these steps:
- Sign in to your TurboTax account
- Click on Federal Taxes tab
- Choose Wages and Income
- Scroll down to Less Common Income and click Start to to right of Miscellaneous Income, 1099-A, 1099-C
- Click Start to right of Hobby income and expenses
The IRS doesn't allow you to deduct hobby expenses directly from hobby income. Instead, you can deduct expenses as an itemized deduction subject to 2% of your adjusted gross income. Also, the amount that you claim as an expense cannot be greater than your income from the hobby. In other words, your hobby cannot generate a loss.
Taxpayers can choose to itemize expenses on their tax returns or take the standard allowable deduction. Hobby expenses can only be deducted if you itemize your deductions.
If you don't have any other itemized deductions, TurboTax will deduct the greater of the standard deduction or itemized deductions. TurboTax will choose the one that lowers your overall tax liability.
Given that "the amount that you claim as an expense cannot be greater than your income from the hobby"... I'm confused.
For example, say I purchased $35,000 in cloud mining contracts in late 2017. Then I earned $10,000 in 2017 and $30,000 in 2018 from the cloud mining contracts. So how do I claim deductions for 2017 and 2018?
For example, can I deduct $10,000 in 2017 and $25,000 in 2018? I'm just guessing here.