Fed Income Tax Question

[tinan]

Hello. I am hoping this is considered budget related as I would like an answer to a question in saving more on Fed. income taxes.

Ok, a friend of ours has told us in the past that he has been able to write off his 4 wheelers somehow as a hobby. We live on a tight budget like most, but we own a horse for our daughter. Let's call it her therapy so to speak, but primarily it is a hobby of hers. We live in the city therefore we have to board her in a barn elsewhere. Anyways, our friend thought that somehow this hobby should be able to be written off on federal taxes somehow. When I have the actual books in hand I plan to look into this further, but for now I am hoping that my fellow Dis'ers will be able to point me in the right direction. Does my friend have a point with this? Or is he completely crazy thinking that there is some sort of write off for this? Additionally, dh thinks that there is some kind of deduction for driving as far as he does for work daily. His roundtrips per day trip is about 13o miles per day. Does he have a point also?

 

[akcire]

Hello. I am hoping this is considered budget related as I would like an answer to a question in saving more on Fed. income taxes.

Ok, a friend of ours has told us in the past that he has been able to write off his 4 wheelers somehow as a hobby. We live on a tight budget like most, but we own a horse for our daughter. Let's call it her therapy so to speak, but primarily it is a hobby of hers. We live in the city therefore we have to board her in a barn elsewhere. Anyways, our friend thought that somehow this hobby should be able to be written off on federal taxes somehow. When I have the actual books in hand I plan to look into this further, but for now I am hoping that my fellow Dis'ers will be able to point me in the right direction. Does my friend have a point with this? Or is he completely crazy thinking that there is some sort of write off for this? Additionally, dh thinks that there is some kind of deduction for driving as far as he does for work daily. His roundtrips per day trip is about 13o miles per day. Does he have a point also?

Okay, here goes but you won't like my answers. Just because you spend a lot of money to do something, does not make it tax deductible.

A horse is a pet, and as such is a liability. You can't write off a horse unless you want to the lie and attempt to say that it's care is part of your medical expenses. I suppose if you used that rational and the costs included were more than 7% of you AGI you could give it a shot. I would think, at a minimum, you would need a qualified doctor or licensed animal therapy person to write a letter to back up that claim. Of course, that screams audit red flag to me, and penalties if the IRS later rules against you. Not to mention the whole karma thing.

Now, if you bought the horse as an "investment", for say $100 and then later sold the horse for $5000. The $4900 profit you made would be taxed. You could then write off the expenses of caring for the horse, against your tax liability on the $4900 profit. Problem is as far as I know, most pet horses don't really go up in value as they age; also this assumes you would sell your daughter's pet.

Finally, if your daughter was making money with the horse--winning prize competition money for example and paying taxes on her winnings, then the expenses related to the horse could possibly be deducted against her earnings. Once again, I would fear an audit and the field agent deeming the horse a pet (unless your daughter was generating some serious horse related income).

**In my mind, the only way your "friend" could be writing off his 4-wheelers is if they are part of a business. It sounds more likely that there is some less than truthful information being shared with either the IRS or his friends.

Finally, as for your husband's daily commute to his primary work place. Sorry, the cost of commuting to a primary work place is not tax deductible. It is the cost of doing business, sounds like he has a long drive.

Keep in mind, I am not a tax professional. I am someone very committed to getting every legal deduction I can, but those mentioned above are not things I would consider trying unless there are unknown extenuating facts.

 

[Darcy03231]

I don't know the answer about the horse, but I do know the answer about the commute (we were audited last year). You can only deduct mileage if you use your personal vehicle for business reasons and are not commuting back and forth from your primary place of employment.

My husband can deduct his mileage. His primary office is less then 2 miles from our house. He goes to a bunch of different jobsites during the course of the year. In fact, yesterday he was a three different jobs. He uses his personal vehicle and the company does not reimburse him in any way for gas, mileage or parking. He keeps track of his milege and saves his parking receipts and we deduct those expenses every year. If something happened and he were to commute to the same jobsite every day for a particular year, we wouldn't be able to do it. We do have to take the mileage that is lower, from our house or his primary office (and its always our house).

 

[Dominus]

I've found that creative tax accounting comes with more risks than rewards. For Example, I play in a band that plays clubs on occasion. I had a fellow musician tell me that he wrote off expenses associated with his "business". Expenses such as strings, picks, new amps or instruments, rehearsal space rent, gas to gigs, etc. So I ask my MIL who's a CPA about it. She says that I could do that, however I would be opening myself up to an audit for my "business". So I'd have to start keeping records of dates played, wages paid, and expenses incurred. I'd also have to report the "income" from my "business". So it just wasn't worth it. We always got paid cash at the clubs, and I'm sure the owners would frown at any tax forms you'd try to present. So I'm happy keeping my "business" as a hobby.

 

[Green Tea]

Hobbies tax deductible??

That's a new one.

 

[tinan]

I am not saying about doing any of this falsely. I was asking because I wasn't aware of any way a hobby could be considered tax deductible. Ever since our friend said this I have been curious. I'm not insinuating about trying to get away with anything. It's just that if this could be considered that way I'd like to know.

 

[sdzman]

Wow, if the tax laws allow right off for things like 4 wheelers and horses used as hobbies then we really are screwed.....It's bad enogh people already take advantage of "legal" write offs. Eliminate Federal income tax and institute a National Sales Tax then all these cheats go away.

 

[ceecee]

Hoobies are SO not tax deductible! As for pets...no again, or everyone with a dog, cat, hamster, etc. would be using them as therapy animals!

 

[bdcp]

I actually had someone say to me one time "you know how everyone fudges their taxes a little bit"? I said "no" and she just looked at me like I was nuts for following the law, really? My DH is a US Naval reservist and he can deduct the miles he drives to and from his drilling site, but that has changed year to year. Last year was the first time in several years he was able to do it again. For a few years it had to be a certain percentage of your income, like medical, but they changed it back again to be a straight deduction. It's also one of the reasons we use Turbo Tax as they walk you through questions to verify what is and isn't deductible.

Your "friend" will be in big trouble if he gets audited as they usually go back a few years. He could owe quite a bit in back taxes and penalties. It's just not worth it.

 

[momto2inKC]

Hoobies are SO not tax deductible! As for pets...no again, or everyone with a dog, cat, hamster, etc. would be using them as therapy animals!

Could you imagine?? lol We have 7 cats, a dog and hobbies that include scrapbooking and gaming, boy wouldn't that be nice to be able to write all that off

 

[pintamino]

I'm sure my parents wished horses were tax-deductible while I was in middle and high school! The horse itself is the cheapest part.

Awesome, healthy, and character-building hobby... not tax deductible.

 

[HHSTigerFan]

Ok, a friend of ours has told us in the past that he has been able to write off his 4 wheelers somehow as a hobby.

He is not writing them off as a hobby, thats sort of a "double negative".. perhaps he has the 4 wheelers, uses them for business and fun, and then writes them off...

Where a lot of people get into trouble with pets, horses and livestock is breeding and showing them.. they try to claim business losses for endless years and eventually the IRS will step in and say its not a business, but a hobby..

 

[bdcp]

He is not writing them off as a hobby, thats sort of a "double negative".. perhaps he has the 4 wheelers, uses them for business and fun, and then writes them off...

Where a lot of people get into trouble with pets, horses and livestock is breeding and showing them.. they try to claim business losses for endless years and eventually the IRS will step in and say its not a business, but a hobby..

But there are very strict rules about what can be written off as a business expense. If you and your family use something for pleasure you'll have a hard time making the IRS believe it's for business use. Otherwise anyone could say anything was for "business use". And you certainly can't write off 100% of something as a business expense if it's not used 100% of the time for business.

 

[HHSTigerFan]

But there are very strict rules about what can be written off as a business expense. If you and your family use something for pleasure you'll have a hard time making the IRS believe it's for business use. Otherwise anyone could say anything was for "business use". And you certainly can't write off 100% of something as a business expense if it's not used 100% of the time for business.

I think you would be a little surprised..

I wrote of 100% of the cost of an $8K lawnmower because I mow a few cemeteries, also use it to mow our yard..

How many people write of 100% of their internet and cost of computer and sit here at DIS half the day??

And endless other examples..

 

[marlynnp]

I wouldn't take any advice from "your friend".

I will try to explain the "hobby" part of the tax code quickly. BUT please note that it has been a few years since I dealt with this so the $ amount may have changed.

Basically, in order to make it easy for people who generate income from something they do as a hobby in their spare time, the IRS has said that as long as the income generated less the expenses incurred remains below $600 you can ignore ALL of it and not worry about any tax implications.

 

[horseshowmom]

I am not saying about doing any of this falsely. I was asking because I wasn't aware of any way a hobby could be considered tax deductible. Ever since our friend said this I have been curious. I'm not insinuating about trying to get away with anything. It's just that if this could be considered that way I'd like to know.

I don't think anyone took your post as meaning that you were trying to do something shady. At least, I know I didn't.

I'm in complete agreement with the others though. Neither of your questions result in a yes answer.

We have 5 horses and a daughter who showed pretty seriously until she started college. You're right, there's a LOT of money involved. She did benefit in many ways (including scholarships), but no income tax benefits.

Your friend reminded me of somebody I know that I had to explain the tax code to (they asked me to help them with their taxes - I wasn't meddling in their business). For many years they had run a profitable side business raising horses, but the bottom fell out of the horse market a few years ago so they gradually sold their mares and stud (only had 3 geldings left).

Out of habit, I suppose, they were gathering their receipts to use to itemize their horse expenses. I had to explain to them that there was absolutely no way that they could justify their expenses if they were audited because while the IRS may not know much about horses, it would be very hard to explain how they planned to raise any colts with no mares and 3 geldings. They were now a hobby.

 

[bdcp]

I think you would be a little surprised..

I wrote of 100% of the cost of an $8K lawnmower because I mow a few cemeteries, also use it to mow our yard..

How many people write of 100% of their internet and cost of computer and sit here at DIS half the day??

And endless other examples..

I thought you were supposed to do a percentage especially for things like home offices, etc. I so love subsidizing people's personal use items. People write off things that they shouldn't. Let's see how they would stand up under an audit. I assume you depreciate it? Anytime you claim a business expense you are much more likely to be audited so anyone doing so needs to be very certain that what they are doing is allowed.

Anyway, the point of this thread was concerning hobbies. I highly doubt the hobby the op mentioned could ever be written off.

 

[hffmnheidi]

If you're in the educational field(including daycare)-you can take off any expense of things you bring into the classroom for use in the classroom(including music cds/party foods/gifts/toys/office supplies/cleaning supplies).

I usually end up taking almost 2500-3000 dollars off a year when I work a full 12 month year because our daycare is a full year program-those costs add up each single month, and, yes, I keep all my receipts in case the IRS wants to see what I actually spend. It's ridiculous the amount of money teachers in the field spend out of their own pocket.

 

[jedijohn]

If we could legally deduct hobbies, I would make going to WDW my hobby

Unfortunately, I would hate to be in that persons shoes if I ever got audited since I am sure there was some marginally (or not at all) legal flexing of the IRS rules.

 

[Cruise]

In addition, keep in mind that if you try to write off any part of a hobby as a "business" expense, you may then be legally obligated to have a business license for the state and/or locality in which you live. In certain parts of Los Angeles, this runs about $800 a year....negating any "savings" you get from a tax write off.

I wouldn't even attempt to write off the things you're talking about, but if you do, be prepared for an audit with whatever receipts and justification you have for doing so and also check your local and state laws regarding business licensing requirements.