Smart TaxesSmart Taxes

Deductions are allowed on some hobby expenses when there's income involved. But only up to a certain point, so be careful.

By MSN Money staff Feb 26, 2014 2:29PM

By Kay Bell,

Bankrate on MSN MoneyHobbies provide a great way to relax from the daily grind. For many people, they also offer a way to make extra spending money.

Be aware, however, when your hobby produces income, you owe tax on it. You can reduce your taxable hobby income by deducting your hobby expenses, but this tax break is limited.

A photographer holding a big DSLR camera. © nullplus/Getty Images
Allowable hobby deductions
You can only deduct expenses up to the amount of money you make on the hobby. Even then, hobby expenses, along with other miscellaneous expenses you itemize on Schedule A, must come to more than 2 percent of your adjusted gross income before you can deduct them.

If you find you are regularly making money from your hobby, it might be to your tax advantage to turn the sideline into a business.

It's not as difficult as you might think. If you operate as a sole proprietor, you report the income on your Form 1040 tax return and you have more options when it comes to deducting your expenses.

Hobby vs. business

The Internal Revenue Service defines a hobby as an activity you pursue without expecting to make a taxable profit. Basically, you do it because you like it, regardless of the cost.


Every dollar of deductions and credits you uncover can mean money in your pocket. Don't file that return until you've gone over this list.

By MSN Money Partner Feb 26, 2014 1:50PM

This post comes from Stacy Johnson at partner site Money Talks News.

Money Talks News on MSN MoneyAmericans love tax breaks.

Everybody knows they can deduct mortgage interest, medical expenses over a certain amount, gifts to charity -- even the cost of preparing your tax return.

But those are just a few of the tax breaks you might be entitled to. Here are 10 commonly missed deductions and credits.


A new crop of fraudsters pops up every year like weeds on your lawn. Follow these tips to keep your info and any refund you're due safe.

By MSN Money staff Feb 25, 2014 12:36PM

By Cameron Huddleston, Kiplinger

Kiplinger on MSN MoneyThe IRS just released its annual "Dirty Dozen" list of tax scams that taxpayers should take steps to avoid this filing season. At the top of the list is identity theft. This widespread scam typically involves stealing taxpayers' personal information to fraudulently file tax returns and claim refunds.

The experience can become a nightmare, as thieves gain access to your Social Security number, credit cards and bank accounts, among other things, leaving you financially vulnerable, says Rip Mason, CEO of LegalShield, a legal services and identity theft protection provider.


If you went looking for a new job last year, take some sting off that search by saving money with these write-offs.

By MSN Money staff Feb 24, 2014 3:55PM

Man reading job listings © Tetra Images, Getty ImagesBy Kay Bell, Bankrate

Bankrate on MSN MoneyThese days, a lot of Americans find themselves pounding the pavement in a quest for a new job, whether they've gotten the pink slip or expect to get one soon.

The good news: The search may help you cut your tax bill because under certain circumstances, job-hunting expenses are tax deductible.

New job, same field
First, your hunt for new work must be in the same field in which you're currently or were formerly employed. Uncle Sam won't help out if you decide to totally switch career gears.


The government is hitting the rich with more taxes, but is it fair?

By MSN Money Partner Feb 21, 2014 1:57PM

This post comes from Maryalene LaPonsie at partner site Money Talks News

Money Talks News on MSN MoneyIt's tax time and that means the rich better get ready to open their wallets to pay even more this year. Depending on where you fall on the political spectrum, that's a bit of news that could have you cheering or grumbling.


Abba and Lady Gaga did it, so why can't you? Just be careful which articles you claim, because the IRS has heard this all before.

By MSN Money staff Feb 20, 2014 1:31PM

Musician Lady Gaga poses in the press room during the MTV Video Music Awards at NOKIA Theatre L.A. LIVE on Sept. 12, 2010, in Los Angeles © Frederick M. Brown/Getty ImagesBy Robert W. Wood, on MSN MoneyEveryone needs tax deductions, and they can alter behavior.

That was true even in the feel-good 1970s, when you could hear the feel-good music of the past: ABBA. Turns out ABBA wore outrageous outfits onstage to claim tax deductions. The Swedes were famous for glittering hotpants, sequined jumpsuits and platform heels.

Björn Ulvaeus now reveals the reason for the outfits was the Swedish tax code. Newly published "Abba: The Official Photo Book," says their expensive outfits were tax-deductible only if they were so outrageous they couldn't be worn on the street. U.S. tax law is similar, and that means Lady Gaga's meat dress (pictured) qualifies, her favorite outfit ever. Of course, Gaga has many unique styles, and they're all tax-deductible.


The phones are already ringing off the hook, as the agency usually faces its largest call volume right after President's Day. But it's likely to get worse.

By MSN Money staff Feb 19, 2014 1:52PM

By Jonnelle Marte, MarketWatch

MarketWatch on MSN MoneyNeed tax help? Don't bother calling the IRS.

Late February is typically the worst time to call the tax man, since the number of calls being made to the IRS normally peak right after the Presidents Day holiday. But the IRS is already dropping hints that calling the agency any time this tax season is likely to be a painful experience.

Man on phone at desk © Thomas Barwick/Getty Images"I want to be up front with you and call it like it is," IRS commissioner John Koskinen told taxpayers in a video posted earlier this month on the agency's YouTube channel. "Given our very limited resources, our phone lines are going to be extremely busy this year and there will frequently be extensive wait times."

Indeed, 39 percent of the 109 million phone calls made to the IRS in 2013 went unanswered, up from roughly 30 percent in 2012, according to a report from the Taxpayer Advocate Service, an independent office of the IRS charged with systemic oversight.

And of those callers who were able to get a human on the phone, the average wait time was nearly 18 minutes, up from 12 minutes in 2011 and much higher than the average 3 minute wait time callers experienced in 2004.


Some tax preparation services want to separate you from part of your refund with refund anticipation loans and checks. Just say no.

By MSN Money Partner Feb 19, 2014 12:54PM
This post comes from Stacy Johnson at partner site Money Talks News.

Money Talks News on MSN MoneyWhen you hit the grocery store for milk and eggs, you know you'll run a gauntlet of impulse buys in the checkout line, from chewing gum to tabloid papers. That's just one of the tricks of the supermarket trade.

Should you expect to encounter the same type of marketing when you have your taxes prepared?

Increasingly, the answer is yes.  



Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.