How can I deduct entry fees from prize winnings reported on 1099-Misc box 3?

[lngibbs17]

Received a 1099-MISC for horse show winnings but the amount they have placed in Box 3 doesn't take into account the entry fees paid. It makes it look like I made money when in actuality I lose money every year on this hobby, but I can't find a way to enter this on TT.

[Phillip1]

Hobby income is treated in a special (but not very tax advantageous) manner. Hobby income is not subject to self-employment tax like other income reported on schedule C. You will report the gross income on line 21 of your form 1040 return, and the expenses are reported in a lump sum amount as a miscellaneous itemized deduction. The unfortunate part is that hobby expenses are limited to the gross amount of income reported on line 21 of form 1040.

You can report hobby income and hobby expenses as follows:

1. Go to the Federal Income category.
2. Go to the Wages and Income Subcategory.
3. Find the section labeled Less Common Income.
4. Click start on the line labeled Miscellaneous Income, 1099-A, 1099-C.
5. On the following screen, click start on the line labeled Hobby income and expenses.
6. The next screen will give you one line for the income reported on the 1099-MISC and one line for the sum of all your hobby expenses.

[lngibbs17]

I have followed the steps above but it is still not taking my expenses into account. I entered my actual expenses in and the return is the same as when I put 0 in for expenses. Any more suggestions?

[Phillip1]

My guess is that your itemized deduction are below the standard deduction. Check the return by doing the following:
1.) go to the My account link in your TurboTax, 2.) go to the Tools link in the dropdown menu, 3.) click on preview my 1040, 4.) scroll to the line 40 on form 40 and see if the amount matches the standard deduction for your filing status.

[lngibbs17]

It matches the standard so am I just out of luck? Without entering the hobby information I receive a decent sized refund but when I enter the hobby income and expense, which pretty much offset each other, I owe over $500.

[Phillip1]

Yes. Unfortunately, this is not an uncommon result with hobby income and losses.

[lngibbs17]

Thanks for your help. Which representative do I write to about fixing tax laws? 😉

[MIFARINA]

Hello I have the same issue as the individual who asked the question however I do itemize and the expenses are having no effect on the income?

Thank you!

[MIFARINA]

Never mind I found the answer to my own question:

Beginning in 2018, the IRS doesn't allow you to deduct hobby expenses from hobby income. you must claim all hobby income and are not permitted to reduce that income by any expenses. For tax years prior to 2018, you can deduct hobby expenses as an itemized deduction subject to 2% of your adjusted gross income.

[KrisD15]

This is a very old thread (question) so we are not sure what you are asking. 

Did you get Hobby Income and are you trying to claim expenses for that hobby income? 

Yes, that is correct.

Miscellaneous expenses are no longer allowed to be claimed as a deduction on Schedule A.