Other income

[PBCool]

My income is social security.

What is the best in claiming other income from the sale of kittens?

[LoriLeighEA]

Hi PBCool - Thanks for joining us today!

First you need to determine if selling kittens is a hobby or a business. Here is a great link to assist you with that: 

https://turbotax.intuit.com/tax-tips/small-business-taxes/when-the-irs-classifies-your-business-as-a...

The IRS generally views breeding as a hobby and not a business. Hobby income still needs to be reported on your tax return. You can only deduct hobby expenses equal to hobby income. You cannot take a loss. For Hobby Income:

When in your TurboTax account:

• Click on Federal Taxes tab
• Choose Wages and Income
• Scroll down to Less Common Income and click Start
• Scroll down to Miscellaneous Income, 1099-A, 1099-C and click Start
• Click Start to right of Hobby income and expenses

If you have determined that it is a business and not a hobby, you may report the income and expenses on Schedule C - Profit and Loss from a Business.

This link from the IRS explains further:

https://www.irs.gov/newsroom/earning-side-income-is-it-a-hobby-or-a-business

TurboTax can definitely help you with either scenario.

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[PBCool]

LoriLeigh,

Thank you for your quick response.

I do earn a profit, always bringing in more money than my expenses.

I have a goal to buy a home so I want to use the extra kitten sale income to qualify for a mortgage,

so I think I need to include it on my rax returns?

Therefore, do I call it a business? Not a hobby?

I live in Arizona. No license is required to breed and sell kittens.

Is there anything else I need to do to claim the extra income as business profits?

Thank you again for your help!

PBCool

[PBCool]

ALSO…will the amount of social security I receive be limited, affected, reduced or penalized because I have additional income?

[KarenL4]

Hi, PBCool,

LoriLeighEA isn't available right now, so I am jumping in to see if I can help.

Here is another reference from the IRS as to whether you have a business or a hobby.  What you're describing here sounds like you have an intent to earn a profit and likely meet the other definitions of a trade or business, so you would likely file a Schedule C with  your Form 1040 as previously indicated (unless you made an election to be treated as another type of business---unlikely and you would know it if you did).

As to whether your income from Social Security is reduced, it depends on what type of Social Security income you have.  If, for example, your income is SSI, you may have an income reporting obligation and benefits could be reduced. If your income is traditional retirement income, your benefits won't be reduced because of your other earned income, but you might be taxed on some of your social security (up to 85%).  If you are at all in doubt about whether you have to report your income to the Social Security Administration, you should reach out to them directly, as that question is beyond TurboTax's ability to decide.

This article from the AARP does a great job of explaining how Social Security income is taxed.

Hope this helps!   Good luck with the kittens!

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Best,

Karen