USA: Read If You Accept Electronic Payments (e.g PayPal) - IRS Law Change

[TIBOR PAPP]

it will be gone by April ..a flat 14% tax on new items ..no tax on food or used items.
its coming and it will be 90% less gov.
research..I/m not going to educate..you won't believe me.. and thats fine I am not looking for a pat on the back.

 

[Socratic Monologue]

Hobbyists can certainly deduct expenses but only up to the amount of gross income; they can't deduct expenses that exceed their income and thus show a loss on their tax returns. Bona fide businesses can post losses but after a few years the IRS figures out that your business is really a hobby and disallows the losses, so you owe back taxes.

I understand that changed in or around 2019. I could be wrong.

"A hobby isn’t a business because it isn’t carried on to make a profit. If you receive income for an activity that you don’t carry out to make a profit, the expenses you pay for the activity are miscellaneous itemized deductions and can no longer be deducted. "

https://www.irs.gov/publications/p529#en_US_202012_publink10004386

 

[Socratic Monologue]

That is the difference between an "income producing activity" and a "bona fide business entity". There are rules in place related to the number of years that you show an actual profit for a given time period. It may be interesting to note, that a "profit" can be as little as one dollar. Just do that at least three years out of five, if I remember correctly.

I've heard that three out of five rule, and am banking on it (and hoping next year is a good one). It is much harder to turn a profit from breeding than casual speculation in internet forum posts would have had me believe.

 

[WebSlave]

I've heard that three out of five rule, and am banking on it (and hoping next year is a good one). It is much harder to turn a profit from breeding than casual speculation in internet forum posts would have had me believe.

Yeah, it is a tough business. I believe that the trick is that you have to produce enough animals that selling bulk is what actually pays the bills. The gems that you can sell singularly are only going to be icing to the cake and not something you can rely on year after year.

 

[WebSlave]

it will be gone by April ..a flat 14% tax on new items ..no tax on food or used items.
its coming and it will be 90% less gov.
research..I/m not going to educate..you won't believe me.. and thats fine I am not looking for a pat on the back.

I guess we will see, won't we?

I read my fair share of what is going on. I seriously doubt you could educate me on this subject, unless you are privy to insider info not generally available to the public. I tend to believe facts that appear to be credible. Anyone can post anything in a message on the internet. That in itself, does not make it factual. The lack thereof, of course, does not make it automatically believable.

 

[Rhacosaurus Gex]

2 out of 7 for animal breeding.

 

[Socratic Monologue]

2 out of 7 for animal breeding.

Interesting.

I could only find this claim applying to all animal breeding on less than credible sites. Legit references I found only note this for horse breeding (https://www.law.cornell.edu/cfr/text/26/1.183-1). Do you have any good references that show that the 2 out of 7 criterion applies to the breeding of other animals? I'd sure like it to be true.

 

[Rhacosaurus Gex]

Interesting.

I could only find this claim applying to all animal breeding on less than credible sites. Legit references I found only note this for horse breeding (https://www.law.cornell.edu/cfr/text/26/1.183-1). Do you have any good references that show that the 2 out of 7 criterion applies to the breeding of other animals? I'd sure like it to be true.

I think you are right that it applies to horses.