Royalty expenses for 1099-MISC

[koalawalking]

I received a 1099-MISC for selling stock photography. The amount in Box 2 was just above the $10 IRS reporting minimum. Am I able to deduct the expenses related to generating that income? In particular, I purchased a camera and other gear as well as drove my car to take those photos.

[DianeW777 · Accepted solution]

It depends. 

1. You can use expenses for the sale of your stock photography if you are in an active trade or business. In this circumstance the income would be reported on Schedule  C, as self employment.  
2. If this is considered a hobby, then no expenses will be allowed and the full amount of the income must be reported under the current Tax Cuts and Jobs Act (TCJA) for 2018-2025.

You can decide if it is hobby or business income.  This IRS link will help you: Business or Hobby?

Key elements:

1. 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.
2. 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 tax law is that you must show a profit three out of every five consecutive years to be considered a business.

Once you decide what type of income this is you can use the link and instruction below to see how to report.

• How do I report income from self-employment?

To enter hobby income and expenses in TurboTax please follow these steps:

• Once in your tax return, click on Tax Home (left panel)
• Choose Income & Expenses
• 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