Tax Write Offs?

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NedStackey

NedStackey

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Hey there.

So a friend of mine like to travel a lot and he started a travel blog and he is able to write off a lot of his expenses because of it. I'm just curious, does anyone have any insight into how this works and could I create a homebrew blog so I can write off some of my equipment?
 
Being an accountant I would be pretty hesitant to do that. In an audit, you're going to have to prove to the IRS that it is a legitimate, for-profit, business. Creating a blog to write off a hobby is not a legitimate business IMHO.
 
You can only write it off expenses for a blog if that blog generates taxible income, and then you can only deduct against the income that blog generates. Even then, you have to have enough expenses for that blog that it is larger than the standard deduction.

If your buddy didn't meet that criteria, he's a candidate for an audit.

So, if you have a blog about homebrewing that makes you taxible income, you can deduct your equipment against that blog income. You can't, however, just write a blog then take a deduction against your personal income tax from your day job.

It's all kinda common sense - you can only write off activities that are expenses directly related to the generation of income.

So, unless you are going to get paid an appreciable amount of money for this homebrewing blog, then the answer is NO!
 
TopherM said:
You can only write it off expenses for a blog if that blog generates taxible income, and then you can only deduct against the income that blog generates. Even then, you have to have enough expenses that it is larger than the standard deduction.
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This is wrong on so many levels...lol
 
This is wrong on so many levels...lol
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???? I'm not an accountant, but I am a small business owner and landlord who does my own accounting and taxes, so I have a pretty good grasp on how it works.

Can you please tell me what's wrong with my analysis?
 
HoppyDaze said:
This is wrong on so many levels...lol
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"Wrong" as in, "I agree that this is the situation, however, in an ideal world, it would be different",

or

"wrong" as in, "you're an idiot who has screwed up the basic facts."
 
If the blog is run as a business there is no limit to the amount of losses you can claim on your 1040. The expenses don't have to be larger than the standard deduction. Standard deduction and business losses are two separate things.

The whole thing boils down to if the IRS is going to think this is a hobby or a for-profit business. Section 183 deals with this issue and I would suggest reading it OP. http://www.irs.gov/Businesses/Small...3:--Activities-Not-Engaged-in-For-Profit-(ATG)
 
AZ_IPA said:
To write off hobby expenses, you need income. To generate income via homebrewing is violating the law.
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In theory, one could generate income from homebrewing by commercializing a blog or being a paid writer. Income wouldn't have to come from selling the actual beer.
 
AZ_IPA said:
To write off hobby expenses, you need income. To generate income via homebrewing is violating the law.
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Generating income via homebrewing is only illegal if the income is being generated by selling the homebrew.

Edit: evrose beat me to it.
 
TopherM said:
???? I'm not an accountant, but I am a small business owner and landlord who does my own accounting and taxes, so I have a pretty good grasp on how it works.

Can you please tell me what's wrong with my analysis?
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That sounds right to me (an accountant). The only thing is you don't necessarily HAVE to take the Itemized deduction if it's bigger than the Standard, but there's really no reason not to. (EDIT: for a typical 1040 return. jww has the right of it concerning business expense.)

To the OP, if your blog generates revenue for you, you probably could, but it would need to qualify for self-employed income. For example, if you taught brewing classes and needed to buy equipment for your demonstrations, those expenses would probably qualify. If it's just for funsies and you don't really make money off of it, you can expect a letter from the IRS.

Wouldn't it be nice though ;)
 
Cheesy_Goodness said:
That sounds right to me (an accountant). The only thing is you don't necessarily HAVE to take the Itemized deduction if it's bigger than the Standard, but there's really no reason not to.
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The itemized deduction and Schedule C losses have nothing to do with each other.
 
The accountants on here have been cool, but if you're NOT one, it's smart to refrain from dispensing tax advice. Your personal experience doing your own taxes doesn't qualify you as a professional licensed to do so.

The advice given from the two accountants that have done so on this thread is all I'd consider if I were you OP.

Edit: I see there are 3 accountants posting here. Nice of you guys to help out.
 
Cheesy_Goodness said:
That sounds right to me (an accountant). The only thing is you don't necessarily HAVE to take the Itemized deduction if it's bigger than the Standard, but there's really no reason not to. (EDIT: for a typical 1040 return. jww has the right of it concerning business expense.)

To the OP, if your blog generates revenue for you, you probably could, but it would need to qualify for self-employed income. For example, if you taught brewing classes and needed to buy equipment for your demonstrations, those expenses would probably qualify. If it's just for funsies and you don't really make money off of it, you can expect a letter from the IRS.

Wouldn't it be nice though ;)
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So wait....you would try to run the deduction through schedule A? It would be subject to AGI limitations meaning it would have to be that much more than the standard deduction.

You could try running it though schedule C but after a few years the hobby loss rules would kick in and you'd more than likely get flagged for audit. CPA here...
 
evrose said:
In theory, one could generate income from homebrewing by commercializing a blog or being a paid writer. Income wouldn't have to come from selling the actual beer.
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jww9618 said:
Generating income via homebrewing is only illegal if the income is being generated by selling the homebrew.

Edit: evrose beat me to it.
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Oh I agree, but if you're trying to write-off the expense of homebrewing equipment via income generated from a blog, I don't think you're going to get very far.
 
Cheesy_Goodness said:
That sounds right to me (an accountant). The only thing is you don't necessarily HAVE to take the Itemized deduction if it's bigger than the Standard, but there's really no reason not to. (EDIT: for a typical 1040 return. jww has the right of it concerning business expense.)

To the OP, if your blog generates revenue for you, you probably could, but it would need to qualify for self-employed income. For example, if you taught brewing classes and needed to buy equipment for your demonstrations, those expenses would probably qualify. If it's just for funsies and you don't really make money off of it, you can expect a letter from the IRS.

Wouldn't it be nice though ;)
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Cheesy, I didn't know you're an accountant! That's awesome.

OP, from another accountant, just backing up what these guys have said. It's be hard to make the case that your brewing equipment was a deductible expense, even if your blog was a hobby that generated income. But hey, it's worth a shot, right? What's the worst that could happen? The IRS isn't anything to be feared, you can trust them. :drunk:
 
If you're generating income (other than selling the homebrew - that's illegal) from homebrew-related work/services, you can pretty safely write-off expenses related to generating that income up to (NEAR) the point of the total income itself. e.g.: If you make $500 from homebrew-related activity in a year, you could safely write-off up to (near) $500 of expenses that are directly related to generating that income.

It gets a bit, uhmn, shall we say, more complex when you start having a negative cash flow on the homebrew activity (a company can have a negative cash flow for a certain number of years).

That being said, with a blog that generates no revenue... You can't write off the expenses against that zero-revenue.

If you're a brewing newspaper/magazine columnist, you can of course write off the related expenses against the revenue/income of that activity.

MC
 
Being an accountant I would be pretty hesitant to do that. In an audit, you're going to have to prove to the IRS that it is a legitimate, for-profit, business. Creating a blog to write off a hobby is not a legitimate business IMHO.


This. I do tax work. probably not a good idea unless you are in the business to generate income. You can look it up here http://www.law.cornell.edu/uscode/text/26/subtitle-A/chapter-1

c) Limitation on losses of individuals
In the case of an individual, the deduction under subsection (a) shall be limited to—
(1) losses incurred in a trade or business;
(2) losses incurred in any transaction entered into for profit, though not connected with a trade or business; and
(3) except as provided in subsection (h), losses of property not connected with a trade or business or a transaction entered into for profit, if such losses arise from fire, storm, shipwreck, or other casualty, or from theft.

That is the qualifying statute I would say that you should draw your own conclusions and I must say that nothing in this post constitutes legal advice and you should check with your own attorney
 
HoppyDaze said:
So wait....you would try to run the deduction through schedule A? It would be subject to AGI limitations meaning it would have to be that much more than the standard deduction.

You could try running it though schedule C but after a few years the hobby loss rules would kick in and you'd more than likely get flagged for audit. CPA here...
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No not the business expense, I was talking about Schedule A deductions. I was trying to figure out why the poster I replied to was being questioned and the only thing I noticed was that he said if the itemized deduction was higher than the standard you have to take the itemized, but that's not necessarily true. I was talking about your typical 1040 that doesn't have a Schedule C but does (maybe) have a Schedule A.
Totally unrelated to the OP.


TheZymurgist said:
Cheesy, I didn't know you're an accountant! That's awesome.

OP, from another accountant, just backing up what these guys have said. It's be hard to make the case that your brewing equipment was a deductible expense, even if your blog was a hobby that generated income. But hey, it's worth a shot, right? What's the worst that could happen? The IRS isn't anything to be feared, you can trust them. :drunk:
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Good lord I had no idea there were this many accountants on HBT. :mug:
 
Good lord I had no idea there were this many accountants on HBT.
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.....at 1:30 on a Friday, no less.

I read this great article once that tried to explain the high % of engineers that are homebrewers by saying homebrewing is a hobby where details matter, and attention to detail is not only a correlating skill among engineers, but one from which they draw great pride.

I would associate that with accounting as well :)
 
WiseEyes said:
not many of us in the "classic" professions it seems.
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There are plenty of us, just fewer opportunities for our professional skills here. And in the few threads discussing economics of brewing, people either start whining because it's "boring" or present bad economics/finance and get mad when finance professionals call them out.
 
Wow! I didn't think there would be so many answers. Thanks everyone. I had an idea that it wouldn't be very legit but doesn't hurt to ask. I'm always looking for ways to get free stuff for my hobbies.

I think there are probably more people who do less "creative" stuff for their jobs that homebrew since they need an outlet.
 
Bit of a zombie thread but since it is tax time......Remember you can write off the cost of ingredients if you donate your beer to a legitimate non profit/charity event. Assuming this is an approved use of homebrew in your state. California allows this.....not sure how many other states do.
 
People who are talking about the standard deduction and itimizing and only claiming expenses up to your revenue are talking about the wrong thing, and if you are using a sch A for your own business I suggest you go see an CPA. If you have a business you have to file a sch C you can take all kinds of expenses on a sch c but you have to have some income. And if the business is not profitable in the first few years you will have a difficult time convincing the IRS that it is a business and not a hobby. Also any revenue you do claim will be subject to 15% self employment tax which you will not be able to reduce through expenses.

I would not recommend trying to start a business just to save money, it will most Likely backfire.

I was an accountant for a few years and have started a blog.
 
rokfreek said:
Also any revenue you do claim will be subject to 15% self employment tax which you will not be able to reduce through expenses .
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Actually, SE Tax is on net Self Employment Income, so it is reduced through expenses. And depending on other factors related to your situation, SE Tax on any given venture could be as low as roughly 3%, but as high as roughly 15% (as you state).

Qualifucations: CPA for decades, Tax Attorney for about a decade, small business owner, and I stayed at a Holiday Inn Express last night...
 
Ridire said:
Actually, SE Tax is on net Self Employment Income, so it is reduced through expenses. And depending on other factors related to your situation, SE Tax on any given venture could be as low as roughly 3%, but as high as roughly 15% (as you state).

Qualifucations: CPA for decades, Tax Attorney for about a decade, small business owner, and I stayed at a Holiday Inn Express last night...
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Do you mind giving me your unofficial, professional opinion on my situation? California state law allows me to donate homebrew to non-profit charity events. So I then can claim my costs (ingredients, propane, CO2) involved in brewing beer for the charity event? Obviously I can't claim my time nor can I claim "retail value" since it's homebrew. I get official letters from the charity noting my donation. As far as receipts...I have credit card statements but my LHBS does not provide itemized receipts. Is that enough?
 
Phunhog said:
Do you mind giving me your unofficial, professional opinion on my situation? California state law allows me to donate homebrew to non-profit charity events. So I then can claim my costs (ingredients, propane, CO2) involved in brewing beer for the charity event? Obviously I can't claim my time nor can I claim "retail value" since it's homebrew. I get official letters from the charity noting my donation. As far as receipts...I have credit card statements but my LHBS does not provide itemized receipts. Is that enough?
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To be honest, I would have to research that. Generally, you can deduct the fair market value of what you donate to a charity. I have honestly never dealt with a situation where a taxpayer makes consumer/retail type of goods, that are not part of a for-profit business, and gives them to charity.

I also do not spend any time preparing tax returns anymore. I was once a tax prep guy but my tax dealings now are primarily with buying/selling businesses and the occasional dust up with the IRS or other taxing authority.
 
Ridire said:
To be honest, I would have to research that. Generally, you can deduct the fair market value of what you donate to a charity. I have honestly never dealt with a situation where a taxpayer makes consumer/retail type of goods, that are not part of a for-profit business, and gives them to charity.

I also do not spend any time preparing tax returns anymore. I was once a tax prep guy but my tax dealings now are primarily with buying/selling businesses and the occasional dust up with the IRS or other taxing authority.
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In red, above:
That's where the problem lies. Fair market value (FMV). If you donate a painting to a charity, you'd have it appraised by a certified appraiser and you can deduct that amount. Catch: if total deductions exceed your total revenue, you cannot carry over the excess to future years. You'd probably be better off selling it and donate some of that money to the charity each year.

So in the above case, FMV is typically more than cost of paint, canvas, and frame. To put a FMV on a keg of homebrew beer you'd come up with $0 as you cannot sell it legally, from that perspective, it has no value. Above the cost of ingredients, malt, hops, yeast, water, and propane, could you claim $3-5 a pint instead? Good question.

Disclaimer: Not a CPA, just a bystander looking for an (intellectual) argument.
 

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