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

Since the activity is deemed a hobby, the income of $10,000 should be included in her gross income. However, hobby expenses cannot be deducted for AGI. Instead, Priscella can claim up to the amount of her hobby income ($10,000) as an itemized deduction on Form Schedule A. Therefore, the correct option is to include $10,000 in income, deduct nothing for AGI, and claim $10,000 of the expenses as itemized deductions.

Priscella Pursued a Hobby of Making Bedspreads in Her Spare