schedule c

[KPD2]

I acted as the general contractor while building my daughter's home in 2019 and 2020 'not for profit'. The construction loan disbursements were sent to me and I handled all payments for materials and services. The bank sent me a 1099misc for the amount disbursed in 2019 and I assume they will do the same for 2020. My question is how do I fill out my 2019 taxes that balances out what was disbursed and paid out so that I don't pay income taxes on the disbursements?

[John1604]

Just show your expenses for materials, labor, taxes, etc. like you normally do when you build other houses. If you're doing it for no profit, over two years the expenses will equal what you receive from your daughter and you will have no income from that project. It is the same as if you were in the unhappy situation where your spec house sold for so little you barely broke even.

[DawnC]

Business income (1099-misc box 7 proceeds) and your related business expenses go on Schedule C, see instructions below.  Keep in mind schedule C is for reporting business income and expenses.  A requirement of using Schedule C is that you are in a business trying to seek a profit.   Without a profit motive, you are considered to be engaged in a hobby.  

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.

Be careful when classifying the income.  If you call it 'not for profit', you can't use Schedule C and therefore can't avoid the income tax.  The article below covers the opposite of your situation but explains the implications of 'for profit' and 'not for profit'.   

When the IRS Classifies Your Business as a Hobby

Where do I enter Schedule C?

[KPD2]

I never did my own taxes back long ago when I built homes as a business so I am not familiar with how to enter the information.  I got $117K  in disbursements and spent $130K in 2019. 1099 misc for $117K from the bank.

Do I need to upgrade to TurboTax business?  Currently using Deluxe

[John1604]

You need “TurboTax Self Employed," not TT Business. The latter does not allow you to deduct your business’ expenses. 

[KPD2]

Would I list the total expenses paid out for 2019 in the section 'Enter Your Business Expenses' in the box for line item 'Contract Labor'?  And include all expenses including permits, temp power, porta john, etc etc?

[AnnetteB6]

You would only enter any amounts paid to other independent contractors in the 'contract labor' section.  If you paid any subcontractor more than $600, then you should have issued them a Form 1099-MISC.

The other expenses can be reported in whichever category best fits, such as licenses, supplies, utilities, etc.  Or you can categorize them yourself and include everything in the miscellaneous expense category where you can enter your own description and amount.

@KPD2

[KPD2]

Ok to use TT Deluxe and not do the upgrade to Self Employed? Just want to be sure.

thank you

[DoninGA]

---

@KPD2 wrote:

Ok to use TT Deluxe and not do the upgrade to Self Employed? Just want to be sure.

thank you

---

You can use the Deluxe online edition to report your self-employment income on Schedule C.  However, if you have any self-employment expenses to enter the you Must upgrade to the Self-Employed online edition.