(For details it's 3D printing - bought tools to build 3d printers, repair, etc) Would like to expense the tools/printer parts and materials but not sure about depreciation and such.
Follow these steps to declare this income and it's subsequent expenses on your return:
The program will walk you through the process of declaring this income and any expenses related to its activity. Please note that the expenses cannot create a loss. Additionally they must deducted through Schedule A and are capped at 2% of you AGI.
Follow these steps to declare this income and it's subsequent expenses on your return:
The program will walk you through the process of declaring this income and any expenses related to its activity. Please note that the expenses cannot create a loss. Additionally they must deducted through Schedule A and are capped at 2% of you AGI.
So what's the difference in making it hobby income vs the 'schedule C'?
When you declare the Hobby Money through Other Income you are not obligated to pay Self-Employment Taxes on any income that is generated while with Schedule C you are. But, If you do use Schedule C you are allowed to have a net loss and that is not allowed with Hobby Income. If you have plans to establish this as a for-profit enterprise I suggest that your opt for a Schedule C filing.
Thanks Jamie! So if I plan to keep doing it, even if it's not profitable now but within 5 years(I believe I read that on another post to IRS) then it should be good as Schedule C? What are the taxes like for Self Employment Tax? I Assume it's only taxed on the SET Income? And would I need to do anything specific for the deprecation/etc with Schedule C vs A?
I guess with that last one is there really any other negative to C except for Self Employment Tax?
Yes you are correct, the Self-Employment Tax is only applied to any gains from the activity when you use Schedule C. To elect depreciation would be your choice, if you buy equipment that has a lifetime of more than 1 year then it is possible that the cost be amortized. The option to depreciating your equipment would be applying Sec 179. This would allow you to expense the purchase or otherwise depreciable equipment. The major factor with Sec. 179 is that it can't be used to create a loss. Before I go totally off topic I would recommend that you file with Schedule C, it would be more profitable in the long run and easier to deduct certain expenses.
Hey again Jaime, which field do I enter it under? I'm in Business Income and theres 1099-Misc, general, other, and gave back. Assuming income goes under one of the 2nd or 3rd but not sure.
If you didn't receive any 1099s for your income in 2016, General income is the name of the game for this year. The other sections are for income that is formally reported through various series 1099 forms.
Thanks! Do I need to actually separate every expense or can I add them up somewhere else and put them in in a single or consolidated lines?
You will separate your expenses by category for example; Advertising and Promotion, Insurance, Meals & Entertainment, etc. You can sum up the items in each category and enter one line item per category. Nevertheless to keep everything safe I recommend that you create a light ledger in a spreadsheet and keep a copy in your records along with the receipts.