Deducting Home Brew Expenses

[distributistdad]

It won't work.

Certainly seems like it might in the short term. Setup a consulting business - you can create a website for $25/year (another expense you could deduct) along with products that you could make. Think keggles, stir plates, etc. Things you could build and turn for a profit. You could also (with a small amount of capitol) buy some things in bulk and resell them individually (corny kegs, parts, mills, maybe even grains or hops). I have about a dozen buddies that save all their pop off amber bottles for me. I wash them, remove all the labels and package them up - then sell them on Craigslist to other homebrewers.

It'd be easy to make a profit in the homebrewing industry without licences and without actually selling any beer (though if you were trying to make a go at this in most states you'd need a sales tax permit). Then, you *might* be able to claim you have a business and deduct related expenses (i.e. ingredients, equipment) calling it research and development for your products / services.

The issue you'll run into is that this would no doubt be an ongoing thing, and consistently showing business losses on your tax return is probably not a good idea.

My father-in-law manages our state dept. of revenue's audit department. He has told me many times that the way they they determine individuals they are going to field audit is by looking for trends in personal returns (i.e. business losses reported year after year when your primary income is reported on a W-2).

Even if you do get away with it for your whole life, it's not honest. And I for one would prefer honesty and a clear conscience any day to saving a few tax dollars.

 

[Phunhog]

Do we really want the IRS looking at our hobby?

No. Please don't give them a reason to.

Every hobby though has a legitimate "business" side to it. Let's say you set up a legitimate side business( FBN, tax id, seperate bank account) teaching people how to homebrew. Even if it is only a few hundred dollars...you are required to pay taxes on that income and you are entitled to take any deductions that are related to earning that income. In this case it would be brewing ingredients and equipment.

 

[HawksBrewer]

Man, it stinks in here.

:sniff sniff:

Smells like trolls, you know, the green ones that hide under the bridge w/ perpetual snot hanging from their noses? Yeah, those.

 

[MarshmallowBlue]

Cost of commuting is absolutely not deductible. This is not even debatable. You get into some grey area if you work from home but then your expenses are no longer commuting if they are deductible.

Im not talking about driving, I'm talking about public transit including busses trains etc. which Not only I but everybody in my office deducts. I'll be forward when telling you that you don't get much back. I also don't have a 1040 or W2, Us contract folk get 1099 Miscs!

 

[ricksam]

Man, it stinks in here.

:sniff sniff:

Smells like trolls, you know, the green ones that hide under the bridge w/ perpetual snot hanging from their noses? Yeah, those.

WE'VE BEEN INFILTRATED!!

 

[MarshmallowBlue]

The Evil IRS is Here! Everybody hit the dirt! They're passing out audits left and right! The IP's have been logged! Get you're receipts out form the past 7 years of everything.

 

[Ridire]

Im not talking about driving, I'm talking about public transit including busses trains etc. which Not only I but everybody in my office deducts. I'll be forward when telling you that you don't get much back. I also don't have a 1040 or W2, Us contract folk get 1099 Miscs!

Yeah, you can get up to $200 - $250 of before tax reimb. for public transportation. General rule for commuting, though, is that it is not deductible.

 

[Phunhog]

I donated some homebrew for a charity beer tasting. After researching IRS laws I plan on taking an "in kind donation" deduction for the supplies (grain, hops, yeast). According to the IRS you can deduct your costs for the raw ingredients only...not for your time. They give an example of someone who bakes cookies for a charity function. They are allowed to take an "in kind" donation for the money spent for the ingredients to make the cookies.

 

[Misplaced_Canuck]

Cost of commuting is absolutely not deductible. This is not even debatable. You get into some grey area if you work from home but then your expenses are no longer commuting if they are deductible.

http://www.irs.gov/taxtopics/tc514.html

TurboTax asks for your commuting miles because there is a place on Form 2106 to put your total miles, your deductible miles and your commuting miles. I highly doubt TurboTax is deducting the miles you list as commuting.

There's a big difference between "commuting" and "traveling". For a while I was doing IT consulting work on W2 in Raleigh, traveling from Columbia on a weekly basis. My traveling expenses were deductible. If you are doing consulting work in a remote metropolitan area for a limited amount of time, your traveling expenses may be deductible: http://biztaxlaw.about.com/od/businesstaxdeductions/f/commutingdeduction.htm (Point #2).

I did have to pay temporary living expenses (also deductible).

Anyways... I was also a homebrewing consultant for a while, and yes, I was able to write off my expenses [this was in Canada, so your mileage may vary]. The idea is that the consulting business had to show revenue (and ultimately a profit) from that line of business.

Homebrewers generally won't generate much of a revenue from that line of business, and as such, would likely have to drop that line of business from their portfolio (I can't think of any other way to say it).

MC

 

[TheInnKeeper]

Curious on everyone's thoughts here, we have a LLC(not sole proprietorship) where we manage other peoples vacation rentals, run our own vacation rentals as well as other various related side gigs like offer notary services, supply deliveries, consulting, light cleaning repair and construction.

We commonly entertain clients, owners & renters including limited complementary food and beer for marketing and entertainment.

Could I get away with writing off 50% of my all grain and yeast costs?

 

[Twinkeelfool]

Are you licensed to sell alcohol? If not you probably should keep it quiet if you’re selling it

 

[TheInnKeeper]

Are you licensed to sell alcohol? If not you probably should keep it quiet if you’re selling it

Any beer and food we provide is 100% complimentary for clients and guests as part of marketing, advertising and\or entertainment purposes which traditionally would be considered a legitimate write off.

 

[MaxStout]

You might be able to pull it off as a business writeoff, at least partially. Like you could with food being served. You could clump it all together as "entertainment," but if you're ever audited, you will need to come up with receipts.

But the problem may be licensing, or lack thereof. Even if you're not actually selling the beer, you're giving it away as part of a promotion. The expectation of business (or leads, etc.) from some of those clients could be viewed as "consideration" (something of value) in return for the beer.

 

[TheInnKeeper]

You might be able to pull it off as a business writeoff, at least partially. Like you could with food being served. You could clump it all together as "entertainment," but if you're ever audited, you will need to come up with receipts.

But the problem may be licensing, or lack thereof. Even if you're not actually selling the beer, you're giving it away as part of a promotion. The expectation of business (or leads, etc.) from some of those clients could be viewed as "consideration" (something of value) in return for the beer.

Right exactly, it kind of falls into a grey area by my thinking.

No where in our written or published marketing, advertising or anywhere does it mention ANYTHING about "free" food or drinks so IMO it should not be considered a core business function or something we use "lure" clients. Its simply just something we provide to existing clients\renters unannounced to seperate ourselves from our competition or "sweeten" the deal off the record if you will.

Just looking to offset a couple thousand dollars a year for what is essentially giving away my home brew as an off the record perk for our loyal clientele

 

[Twinkeelfool]

I’m not sure about where you live but “reasonable” and “common sense” don’t really describe the tax office lol

 

[MaxStout]

Right exactly, it kind of falls into a grey area by my thinking.

No where in our written or published marketing, advertising or anywhere does it mention ANYTHING about "free" food or drinks so IMO it should not be considered a core business function or something we use "lure" clients. Its simply just something we provide to existing clients\renters to seperate ourselves from our competition or "sweeten" the deal off the record if you will.

It could be a black-and-white area if your promotional use violates your state alcoholic beverage laws. That would depend on the definitions within your state's licensing laws and those laws vary state to state. You may be providing something completely gratis--maybe your activity is exempt from licensing requirements. But maybe it's not. It might be wise to find out.

 

[BrewnWKopperKat]

Curious on everyone's thoughts here, we have a LLC(not sole proprietorship) where we manage other peoples vacation rentals, run our own vacation rentals as well as other various related side gigs like offer notary services, supply deliveries, consulting, light cleaning repair and construction.

We commonly entertain clients, owners & renters including limited complementary food and beer for marketing and entertainment.

Could I get away with writing off 50% of my all grain and yeast costs?

My thoughts: double check any answers you get here with the LLCs attorney and/or accountant.

 

[grampamark]

Hmm. I‘m a grain farmer. Maybe I should be writing off my grain purchases as “test plot samples”.

With my luck I‘d get an auditor that knew the difference between malted and unmalted grain.

 

[bracconiere]

My thoughts: double check any answers you get here with the LLCs attorney and/or accountant.

LOL, or you could just skip the middle man, and ask the ATF, and IRS.....

 

[bracconiere]

Hmm. I‘m a grain farmer. Maybe I should be writing off my grain purchases as “test plot samples”.

With my luck I‘d get an auditor that knew the difference between malted and unmalted grain.

as long as you use the excuse that your making organic fertilizer, and piss in the field....sounds solid!

 

[Knightshade]

Gray area line of thinking....
+ Inconvenience of being audited....
+ Penalties & fees if the IRS determines that you owe....
+ Extra scrutiny in following years by IRS (increased likelihood of being audited....again.)....
* How Much Pain You Can Endure
= Tolerance to Try Writing Homebrewing Expenses Off

 

[Mr. Vern]

Could I get away with writing off 50% of my all grain and yeast costs?

Seems to me that this would fall under the same law that prevents (some of) us from traveling with our homebrew and serving at a party or event. State law dictates some of this; "Family use and home consumption" is what I come across. The loopholes are so tiny that it would be painfully obvious if a person attempts to use them. Bottom line, common sense of the law says the final product is for personal enjoyment only.

Now a savvy homebrewer may develop a business plan under their LLC that includes grain, hops, or yeast that may be written off due to (place your legal loss excuse here). I have an idea that I am working on which may carry this type of expense for Hops and Grain. Now to get a profit on my LLC and actually have something to write off is another challenge.

 

[TheInnKeeper]

LOL, or you could just skip the middle man, and ask the ATF, and IRS.....

This is what the IRS says as of last year for the 50% deduction

There is concern that if a meal is provided solely for the purpose of entertainment, it would become nondeductible as well. The IRS’ minimum standards for a meal still allows the deduction. The standards include the following:

• The meal is not lavish/extravagant.
• A substantial business discussion took place before, during, or after the meal
• There was a business purpose for the meal.
• The cost of the meal was not included in an entertainment-type ticket.
• An owner of the business attended the meal.

Therefore, meals can be deducted as a business expense if they are directly related or associated with the active conduct of a trade or business (with a valid purpose and documentation). Once this test is established, the expense falls into two categories: 50 percent deductible or 100 percent deductible. There is an additional caveat that if a meal is considered “lavish and extravagant” under the circumstances, the extra portion attributable to extravagance is not deductible at all. Meals with employees or business partners are only deductible if there is a direct or indirect business purpose. I’ve listed out common items that fall into each category to press down your taxable income!

https://proconnect.intuit.com/taxpr...-that-are-fully-deductible-yes-they-do-exist/

 

[BrewZer]

Right exactly, it kind of falls into a grey area by my thinking.

No where in our written or published marketing, advertising or anywhere does it mention ANYTHING about "free" food or drinks so IMO it should not be considered a core business function or something we use "lure" clients. Its simply just something we provide to existing clients\renters unannounced to seperate ourselves from our competition or "sweeten" the deal off the record if you will.

Just looking to offset a couple thousand dollars a year for what is essentially giving away my home brew as an off the record perk for our loyal clientele

What state do you live in?

 

[TheInnKeeper]

What state do you live in?

A state I can't get anything over 5% on tap.......Utah

There's a lot of support and legal backing for "cottage food production" which essentially means making food at home and then selling at local markets legally or using them for your own business needs.

 

[bwible]

Now let’s say you own a homebrew shop. As the owner of said shop you are expected to know things to provide advice to your clients. So you would brew with new ingredients to understand them and to develop recipes for kits you would sell, etc. Maybe there you could find some area where you might have a legitimate write off for some ingredients. But then you are buying your ingredients at cost, so the write offs would be smaller. Buying my ingredients at cost was about the only benefit I got from my store.

 

[BrewZer]

A state I can't get anything over 5% on tap.......Utah

There's a lot of support and legal backing for "cottage food production" which essentially means making food at home and then selling at local markets legally or using them for your own business needs.

Well, I think you're out of luck. Understanding that I am not a lawyer nor do I play one on TV, Utah law is very specific about homebrew outside the home. Quoted here for your convenience:

32B-11-202. Exemption for manufacture in personal residence of fermented beverage.


(1) As used in this section, “fermented alcoholic beverage” means:
(a) beer;
(b) heavy beer; or
(c) wine.
(2) An individual may without being licensed under this chapter manufacture in the individual’s personal residence a fermented alcoholic beverage if:
(a) the individual is 21 years of age or older;
(b) the individual manufactures no more than:
(i) 100 gallons in a calendar year, if there is one individual that is 21 years of age or older residing in the household; or
(ii) 200 gallons in a calendar year, if there are two or more individuals who are 21 years of age or older residing in the household;
(c) the fermented alcoholic beverage is manufactured and used for personal or family use and consumption, including use at an organized event where fermented alcoholic beverages are judged as to taste and quality; and
(d) the fermented alcoholic beverage is not for:
(i) sale or offering for sale; or
(ii) consumption on a licensed premise.
(3) An individual may store a fermented alcoholic beverage manufactured as provided in Subsection (2) in the individual’s personal residence.
(4) A fermented alcoholic beverage manufactured in accordance with Subsection (2) may be removed from the premises where it is manufactured:
(a) for personal or family use, including use at an organized event where fermented alcoholic beverages are judged as to taste and quality;
(b) if the fermented alcoholic beverage is transported in compliance with Section 41-6a-526; and
(c) if the fermented alcoholic beverage is removed only in the following quantities:
(i) for personal and family use that is unrelated to an organized event where fermented alcoholic beverages are judged as to taste and quality, the quantity that may be possessed at one time is:
(A) one liter of wine for each individual who is 21 years of age or older residing in the household;
(B) 72 ounces of heavy beer for each individual who is 21 years of age or older residing in the household; or
(C) 72 ounces of beer for each individual who is 21 years of age or older residing in the household; and
(ii) for on-premise consumption at an organized event where fermented alcoholic beverages are judged as to taste and quality, the quantity that may be removed for each organized event is:
(A) one liter of wine for each wine category in which the individual enters, except that the individual may not remove wine for more than three categories for the same organized event;
(B) 72 ounces of heavy beer for each heavy beer category in which the individual enters, except that the individual may not remove heavy beer for more than three categories for the same organized event; or
(C) 72 ounces of beer for each beer category in which the individual enters, except that the individual may not remove beer for more than three categories for the same organized event.
(5) A partnership, corporation, or association may not manufacture a fermented alcoholic beverage under this section for personal or family use and consumption without obtaining a license under this chapter, except that an individual who operates a brewery under this chapter as an individual owner or in partnership with others, may remove beer from the brewery for personal or family use in the amounts described in Subsection (2)(b).

 

[TheInnKeeper]

Well, I think you're out of luck. Understanding that I am not a lawyer nor do I play one on TV, Utah law is very specific about homebrew outside the home. Quoted here for your convenience:

32B-11-202. Exemption for manufacture in personal residence of fermented beverage.


(1) As used in this section, “fermented alcoholic beverage” means:
(a) beer;
(b) heavy beer; or
(c) wine.
(2) An individual may without being licensed under this chapter manufacture in the individual’s personal residence a fermented alcoholic beverage if:
(a) the individual is 21 years of age or older;
(b) the individual manufactures no more than:
(i) 100 gallons in a calendar year, if there is one individual that is 21 years of age or older residing in the household; or
(ii) 200 gallons in a calendar year, if there are two or more individuals who are 21 years of age or older residing in the household;
(c) the fermented alcoholic beverage is manufactured and used for personal or family use and consumption, including use at an organized event where fermented alcoholic beverages are judged as to taste and quality; and
(d) the fermented alcoholic beverage is not for:
(i) sale or offering for sale; or
(ii) consumption on a licensed premise.
(3) An individual may store a fermented alcoholic beverage manufactured as provided in Subsection (2) in the individual’s personal residence.
(4) A fermented alcoholic beverage manufactured in accordance with Subsection (2) may be removed from the premises where it is manufactured:
(a) for personal or family use, including use at an organized event where fermented alcoholic beverages are judged as to taste and quality;
(b) if the fermented alcoholic beverage is transported in compliance with Section 41-6a-526; and
(c) if the fermented alcoholic beverage is removed only in the following quantities:
(i) for personal and family use that is unrelated to an organized event where fermented alcoholic beverages are judged as to taste and quality, the quantity that may be possessed at one time is:
(A) one liter of wine for each individual who is 21 years of age or older residing in the household;
(B) 72 ounces of heavy beer for each individual who is 21 years of age or older residing in the household; or
(C) 72 ounces of beer for each individual who is 21 years of age or older residing in the household; and
(ii) for on-premise consumption at an organized event where fermented alcoholic beverages are judged as to taste and quality, the quantity that may be removed for each organized event is:
(A) one liter of wine for each wine category in which the individual enters, except that the individual may not remove wine for more than three categories for the same organized event;
(B) 72 ounces of heavy beer for each heavy beer category in which the individual enters, except that the individual may not remove heavy beer for more than three categories for the same organized event; or
(C) 72 ounces of beer for each beer category in which the individual enters, except that the individual may not remove beer for more than three categories for the same organized event.
(5) A partnership, corporation, or association may not manufacture a fermented alcoholic beverage under this section for personal or family use and consumption without obtaining a license under this chapter, except that an individual who operates a brewery under this chapter as an individual owner or in partnership with others, may remove beer from the brewery for personal or family use in the amounts described in Subsection (2)(b).

Thanks for that but to me it looks like whole lot of grey area the federal IRS likely doesn't care about

I'm not super concerned about running foul of Utah state laws..........you'd be surprised how much they don't care about what businesses do as long as your paying taxes.

 

[Sammy86]

IRS likely doesn't care about

You would be very surprised at what the IRS does and doesn't care about. Having that mentality is what gets people in trouble.

 

[TheInnKeeper]

You would be very surprised at what the IRS does and doesn't care about. Having that mentality is what gets people in trouble.

Totally understand where your coming from but we write off A LOT of food and expenses, this would be a very very small slice of that and according to the IRS laws I posted above were within our rights to claim it the 50% or at least enough to argue it to an auditor.....I'm not concerned about the state of Utah.