CollinsBrew
Well-Known Member
As I did my taxes this year and had to actually pay out rather than receive a refund for the first time in my life, a light bulb went off when I saw what you could itemize as deductions. Apparently, a hobby that is done in the likeness of a business can be used as an itemized deduction on taxes. When I saw this, the wheels started turning.
This is the hypothetic situation that came to mind and you tell me if you think that it holds some water:
We all know that you can't sell your homebrew without some sort of beer/liquor license, dependent on your state of residence. We also know that per adult in the household 100 gallons of beer can be made up to 200 gallons per year. However, what if you were not selling the beer but selling the recipes? You could obtain a business license (or incorporate) for a developmental or logistical business that specializes in the development of beer recipes for sale or for the purpose of writing a beer recipe cookbook of sorts. This could then make all of your homebrewing expenses deductible at the end of the year (equipment, ingredients, home office, brewing space etc.). Not only that but, you could potentially claim a loss for a number years in the event your business is not profitable. I don't see a legal issue here as long as you are legitimately trying to market your recipes in some fashion. The beer made is just a bi-product of your research, must be consumed and the spent grains can be recycled thus making you an environmentally safe company, which could reap more tax benefits for you.
I mentioned the hobby deduction before because that is what got this idea spinning. For a hobby to count it must operate as a business. The example given was a small farm that makes money...let's say $7500 in a year. That must be added to your income for the year. However, the expenses of that farm amount to about $7900 for the year. If this were a business, you could deduct all of those expenses and also claim $400 for a loss in simple terms. Since this is a hobby though, you can only deduct in expenses what you made thus canceling itself out and not benefiting you tax-wise. Basically, is was explained to me that a business claiming a loss for more than the set number of years a business can claim losses will then be deemed a hobby by your friendly IRS.
Anyway, do you guys think this is at all feasible? I already keep a careful watch over what I spend on brewing supplies and materials anyway.
This is the hypothetic situation that came to mind and you tell me if you think that it holds some water:
We all know that you can't sell your homebrew without some sort of beer/liquor license, dependent on your state of residence. We also know that per adult in the household 100 gallons of beer can be made up to 200 gallons per year. However, what if you were not selling the beer but selling the recipes? You could obtain a business license (or incorporate) for a developmental or logistical business that specializes in the development of beer recipes for sale or for the purpose of writing a beer recipe cookbook of sorts. This could then make all of your homebrewing expenses deductible at the end of the year (equipment, ingredients, home office, brewing space etc.). Not only that but, you could potentially claim a loss for a number years in the event your business is not profitable. I don't see a legal issue here as long as you are legitimately trying to market your recipes in some fashion. The beer made is just a bi-product of your research, must be consumed and the spent grains can be recycled thus making you an environmentally safe company, which could reap more tax benefits for you.
I mentioned the hobby deduction before because that is what got this idea spinning. For a hobby to count it must operate as a business. The example given was a small farm that makes money...let's say $7500 in a year. That must be added to your income for the year. However, the expenses of that farm amount to about $7900 for the year. If this were a business, you could deduct all of those expenses and also claim $400 for a loss in simple terms. Since this is a hobby though, you can only deduct in expenses what you made thus canceling itself out and not benefiting you tax-wise. Basically, is was explained to me that a business claiming a loss for more than the set number of years a business can claim losses will then be deemed a hobby by your friendly IRS.
Anyway, do you guys think this is at all feasible? I already keep a careful watch over what I spend on brewing supplies and materials anyway.