Hobbies are one of the great pleasures of life, although it can be expensive to keep them up. Therefore, more than one person has asked, just like you are now if hobbies can be deducted. So, we have decided to write a piece on hobby expenses, detailing what they are and if, indeed you can deduct them. Spoiler alert. You can’t.
Deducting Hobby Expenses
The reason is simple enough to comprehend. Under the United States’ law, one can only deduct expenses that he or she uses for business purposes only. Here’s a short example.
Let’s say you decide to start a small business selling orange juice. You have a little orange orchard outside the city where you go every morning to collect the oranges for that day’s selling needs. You can deduct the money you spend on the gas driving back and forth as a business expense.
When it comes to hobbies, though, they fall under activities that you do for personal pleasure or profit. Therefore, the IRS will classify any such activity as ‘fun,’ and will see no reason to deduct your expenses or your taxes.
The situation is the same even if you make some money out of your hobby. There are hobbies that pay such as photography, painting, singing at weddings, crafts, repairing antiques, writing, and many more. You can monetize them. However, if you engaged in them for fun and not under the umbrella of an actual business with the intent of making a profit, then the expenses cannot be deducted.
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Or the Tax Cuts and Jobs Act. It became effective in 2019, and it changed the way the IRS taxed hobbies. In short, as shown above, you cannot deduct your taxes on hobbies. However, you used to be allowed to claim expenses up to the sum of the income you made in that year from the hobby as an itemized deduction. You cannot do that starting from 2018 because of the TJCA. This deduction will return in 2026, however.
Still, keep in mind that you do have to report any money you make from your hobbies and pay taxes on it.
Here’s a short example. Let’s assume that you make clay pigeons as a hobby and you sell them at the Farmer’s Market. This year, you made $4000. You also had $1000 in expenses. You must go to the IRS and report the $4000 that you made. However, you may not get any deduction on the $1000 that was spent in hobby expenses even if you do itemize your personal deductions.
Hobby expenses cannot be deducted by the IRS because they are considered part of an activity you engage in for fun and not for profit, such as a business. If you do want to deduct them, however, keep all the receipts and start maintaining books and ledgers. You may want to turn your hobby into a business someday.