Making Home Brewing Tax Deductible

I own a small sports contracting company that provides tech services for ESPN. This is the off season and to bide my time until the season begins again, I've started home brewing.

It is a pretty expensive hobby with the startup costs so I tried to figure out how to make this tax deductible. Owning a company does offer me a lot of leeway in terms of deductions but when I talked to my CPA she said it probably wouldn't work stating she didn't believe that I was going to open a brewery (probably true )

I thought about it and the idea of taking business cards and putting them on my home brews to give out at holiday parties came to me. She still seemed wary of the idea but it sounds legit to me. Plus it's a great way to get people to remember the business card because you gave them beer with it.

Either way I'm going to go through with it. If the IRS stops me I'll let you guys know.

Best of luck to ya, but I'm afraid that you won't have much success.

In order for an expense to be tax deductible it must be incurred as part of doing business. In order to have a business in beer you *must* have a valid and current liquor/manufacturer's license in your state.

While it is perfectly legal to name your 'brewery' (as many of us here have done) and to give away as much beer as you choose, it is not legal for homebrewers to perform business transactions or accept payment/reimbursement for their beer - doing so would require a liquor license.

The cost of the license varies from state to state, but here in Ohio it's $3,975 annually.

That's great if you want to hand out your brews with business cards, but you can't legally sell any of your brew so I'm a bit lost what that would gain you. The business cards could certainly strike up some interest in your beers and get others interested in the hobby, but it's not really a business.

I admire your passion for the hobby though. :rockin:

My thought was to use the business cards to advertise my sports company. I'm not selling the beer but instead giving them out with my business card as the label.

There's a lot you can do tax wise when it comes to advertising your company. The beer would just be a vehicle to carry my personal business card which could thus increase my sales in contracting.

I think if you gave away good purchased craft beer, you eliminate the entire BATF/local legal liability.

Honestly most, "regular" people want a Stella. Sad but true.

Exposure to liability...?

food product, bottle bombs, etc

There are specific sections in the IRC that refer to "Hobby Losses" and limit their deductibility. Homebrewing falls squarely under that category.

However, as with anything to do with taxes, it's only a problem if the IRS catches you.

good luck.

senorfartman said:

My thought was to use the business cards to advertise my sports company. I'm not selling the beer but instead giving them out with my business card as the label.

There's a lot you can do tax wise when it comes to advertising your company. The beer would just be a vehicle to carry my personal business card which could thus increase my sales in contracting.

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Oh, well that makes much more sense.

senorfartman said:

My thought was to use the business cards to advertise my sports company. I'm not selling the beer but instead giving them out with my business card as the label.

There's a lot you can do tax wise when it comes to advertising your company. The beer would just be a vehicle to carry my personal business card which could thus increase my sales in contracting.

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Sure, advertising would be expensable, but you have to follow the money. To claim something, you have to assign value, but as a home brewer, you are prohibited from receiving any compensation (value) for the item.
Part of me also thinks that handing them out in a business setting, regardless of claims against taxes or money changing hands, would run afoul of some draconian alcohol regulation or another. If you do it, probably better to keep it off any records and hope there is not an ABC agent at the party.

Wahoo Wheat said:

There are specific sections in the IRC that refer to "Hobby Losses" and limit their deductibility. Homebrewing falls squarely under that category.

However, as with anything to do with taxes, it's only a problem if the IRS catches you.

good luck.

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Catch 22 here:

The hobby loss provision allows the deduction of expenses only to the extent of income generated by that hobby... so you're not deducting expenses in excess of income generated.

If you are generating income from your homebrewing "hobby," then you have a host of TTB issues to deal with.

I say charge consulting fee to help "customers" choose the right ingredients for brew ... they pay the fee and buy the ingredients.

You brew a kick-ass brew, and deliver free of charge, as a sample of what their choice of ingredients created ..

(of course, you need to keep a six or so fro your self for the archives) ..

OR, how about donating the beer to charity, and writing off the value (McNeill's up here is about $4.00/bomber or maybe 20 cents/oz)

Can you tell I am NOT a CPA ?

I'd check the HBing law in your state first.

Most of us know that you are really not supposed to give you brew out to anyone but family members and close friends not business associates.

kappclark said:

I say charge consulting fee to help "customers" choose the right ingredients for brew ... they pay the fee and buy the ingredients.

You brew a kick-ass brew, and deliver free of charge, as a sample of what their choice of ingredients created ..

(of course, you need to keep a six or so fro your self for the archives) ..

OR, how about donating the beer to charity, and writing off the value (McNeill's up here is about $4.00/bomber or maybe 20 cents/oz)

Can you tell I am NOT a CPA ?

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I appreciate your input but that's not really a direction I'd like to take. I already have a consulting company for lacrosse and contract for ESPN under the same name.

The entire point is to try and make tax deductible all the brewing equipment and beer I make. I'm using the beer as an advertising method for my company logo to promote my services.

Out of curiosity, I don't really understand why it is important to make your homebrewing hobby a tax deduction/business expense for your legitimate business...

Rather than trying to legitimize the federal subsidy of your homebrewing, wouldn't it just be easier to do what most folks do in these situations and have the business pay for it and bury it in your M&E or other expenses and call it a day? Just sayin.

It's quite simple...IT ISN'T LEGAL!

Home brewing is only legal for PERSONAL use. If you deduct it as a business/advertising expense, then it is the business that is brewing it. That IS NOT personal use.

So not only does it make your home brew illegal, but it means you can't deduct it because you can't deduct the cost of illegal activities.

I remember some legal tip of the day on the radio, where a bar or something in Florida had a gambling set up in the back room. The local police knew about it, and once a month they would 'raid' it and give the bar a fine. The bar was still making money, so they continued for years.

What got them in trouble was they deducted the fines as a business expense, and the court case that pursued resulted in a ruling that you can not deduct the cost of illegal activities.

I know you're not deducting fines, but if the BATF decided that you're brewing for business purposes, then you WILL have some fines coming, and as a result your tax deductions will loose their legitimacy at the same time.

senorfartman said:

I'm using the beer as an advertising method for my company logo to promote my services.

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As soon as you do that, you are no longer homebrewing. If you are no longer homebrewing, you need a license to brew and pay federal excise tax and all that other great stuff.

Here is the text of 26 U.S.C. s. 5053, which is the homebrewing exception in the Internal Revenue Code:

Beer for personal or family use
Subject to regulation prescribed by the Secretary, any adult may,
without payment of tax, produce beer for personal or family use and
not for sale. The aggregate amount of beer exempt from tax under
this subsection with respect to any household shall not exceed -
(1) 200 gallons per calendar year if there are 2 or more adults
in such household, or
(2) 100 gallons per calendar year if there is only 1 adult in
such household.

While you are not selling your beer, you are proposing a commercial use, i.e., advertising. Sure, you can deduct your expenses from income taxes, but your cost is the excise tax, license fees, and all that other lovely red tape. Take your pick.


TL

Well it was a beautiful dream. Brew licenses here in MD are not cheap so guess I'll scrap that.

Well, it can still be a beautiful dream.

I'm self-employed, myself. I don't mean to sound too haughty, but if there were a way to deduct brewing expenses, I would have figured it by now. I'm still working on it, but in the meantime, I hope to keep folks from getting themselves in trouble. This is one of those situations where a little bit of knowledge can be dangerous.


TL

I'd guess "somebody" has never been through a real IRS audit. T&E deductions are such an obvious place to hid things, that it's the first area checked in detail.

david_42 said:

I'd guess "somebody" has never been through a real IRS audit. T&E deductions are such an obvious place to hid things, that it's the first area checked in detail.

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not that anyone would ever dare incorrectly classify personal expenses as business expenses in the first place...that would just be wrong! 'Course, 'somebody' prb knows there are more ways than one to skin a cat.

Ever experience one of the old TCMP audits? Yikes!

I know this is an old thread, but hell...lets resurrect it.

I've owned a business for years. I average two to four employees and there are many ways you can make homebrewing tax deductible.

Our BIG corporate brothers have shown us the way time and time again. If you have ever worked for BIG anything, you may have experienced a TEAM BUILDING exercise.

Example: your department/team goes to some place to experience white water rafting. It's a team building exercise - all tax deductible. Company picnic - tax deductible. Skydiving - tax deductible... you get my point.

A local business here in Minnesota has made it work. Vine Park Brewing is set up for you and your group to brew a batch (15 gal) of beer for $135. You show up, add ingredients, push buttons, pour into buckets and there you have it...beer and team building.

So, if you invite your employees over for a "team building" session and you happen to produce a few gallons of home brew in the process, does the IRS care? probably not.

Only drawback could be that the SWMBO doesn't care for the weekly company meetings at your home. (You could always brew at work)

Seabee John said:

I know this is an old thread, but hell...lets resurrect it.

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Yes, burying it as something else...excellent idea!