No. A hobby is not a business and due to the current tax law the hobby expenses are not deductible. You can decide if it is a hobby or a business using all the factors. It may simply be a sale of personal use items. Once you review the information you can make your entry on your tax return.
Companies have received new reporting rules that require they report to the IRS any sales that equal or exceed $600. This means you are issued the Form 1099-K and the IRS receives a copy as well.
If it is not a hobby or a business but simply a sale of personal items and there is a profit you will report as a sale of investment property.
If there is a loss there is no sale to report because the sale of personal use items is not allowed.
The sale of personal items is considered investment income is there is a profit or gain. The gain is determined based on your cost basis in the asset your sold. Purchase price and any sales expense are what is allowed to be used for the cost basis to determine gain or loss. Personal losses are not required to be reported and those losses are not allowed to offset or reduce other taxable income.
- Keep all of your records pertaining to the sales with your tax return.
These are considered investment sales for tax purposes and reported on Schedule D. TurboTax CD/Download and TurboTax Premier Online will handle these transactions. You can use the following link for instructions on how to enter into your tax return.
Any income received for services or goods is taxable. You have to decide if it's a hobby or a business for tax purposes. Review this page from IRS:
Key elements:
To enter hobby income and expenses in TurboTax please follow these steps:
- A hobby requires you to report the income you received and under the current tax law, Tax Cuts and Jobs Act (TCJA), no expenses are allowed to be used to reduce the money collected even if you itemize deductions.
- A business allows you to deduct the costs necessary to obtain the income. The law explains that 'you must be engaged in the activity to produce a profit'. The test under IRS is that you must show a profit three out of every five consecutive year.
- Once in your tax return, 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
@forologia
[Edited: 03/10/2022 | 12:59p PST]
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