My wife had a hobby income of $1665 and expenses of $1014 for a net income of $651. When I add the income and expenses into TurboTax it increases my taxes due by $686. If I adjust the expenses equal to the gross income yielding a net income of $0, I still owe an additional $686 in taxes. Is this calculation working correctly?
A business has net income. A hobby has gross income here and expenses there- no netting allowed.
The hobby income goes on Line 21 of the 1040, and the expenses go on Schedule A as miscellaneous deductions. More often that not, miscellaneous expenses don't impact your tax return due to the following:
1/ You need to itemize on Schedule A
2/ Your expense write-off begins after you meet the 2% of AGI floor. So, if your tax return AGI is $60k, the first $1200 in misc expenses are not deductible.
Most taxpayers who have hobby income don't realize any benefit from the expenses. The deduction for expenses is quite limiting.
Is it a hobby or a side business?
https://www.irs.gov/uac/newsroom/five-basic-tax-tips-about-hobbies
A business has net income. A hobby has gross income here and expenses there- no netting allowed.
The hobby income goes on Line 21 of the 1040, and the expenses go on Schedule A as miscellaneous deductions. More often that not, miscellaneous expenses don't impact your tax return due to the following:
1/ You need to itemize on Schedule A
2/ Your expense write-off begins after you meet the 2% of AGI floor. So, if your tax return AGI is $60k, the first $1200 in misc expenses are not deductible.
Most taxpayers who have hobby income don't realize any benefit from the expenses. The deduction for expenses is quite limiting.
Is it a hobby or a side business?
https://www.irs.gov/uac/newsroom/five-basic-tax-tips-about-hobbies