Priscella pursued a hobby of making bedspreads in her spare time.Her AGI before considering the hobby is $40,000.During the year she sold the bedspreads for $10,000.She incurred expenses as follows: Assuming that the activity is deemed a hobby, how should she report these items on her tax return?

Question

Priscella pursued a hobby of making bedspreads in her spare time.Her AGI before considering the hobby is $40,000.During the year she sold the bedspreads for $10,000.She incurred expenses as follows:  Assuming that the activity is deemed a hobby, how should she report these items on her tax return?

Quizplus · Accepted Answer

According to IRS rules, if an activity is deemed a hobby, any income earned from it should be reported on the tax return, but the expenses cannot be deducted for AGI. Instead, hobby expenses can be claimed as itemized deductions up to the amount of hobby income. Therefore, Priscella should include the $10,000 in income, not deduct anything for AGI, and claim up to $10,000 of the expenses as itemized deductions on Schedule A of her tax return.

Priscella Pursued a Hobby of Making Bedspreads in Her Spare