Caroline, a single taxpayer, operates a small pottery activity in her spare time
ID: 2444438 • Letter: C
Question
Caroline, a single taxpayer, operates a small pottery activity in her spare time. During the current year, she reported the following income and expenses from this activity which is classified as a hobby:
Revenue from sale of pottery $ 5,000
Depreciation on potter's wheel ( 3,000)
Property taxes on shed where she does work ( 1,100)
Supplies used such as clay, etc. ( 6,500)
In addition, she had salary of $75,000 and itemized deductions, not including those listed above, of $2,100. What is the amount of her taxable income?
Explanation / Answer
Calculation of Taxable Income Income from Pottery Buisness Revenue from Sale of pottery 5,000.00 Less: Expenses Dep. On Pottery Wheel 3,000.00 Property tax on Shed 1,100.00 Supplies used - Clay 6,500.00 10,600.00 Operating Profit (Loss) from Pottery Buisness (5,600.00) Income from Salary 75,000.00 Less: Standard Deduction 6,300.00 68,700.00 Taxable Income 63,100.00 Note: You can claim one type of deduction (itemized Deduction or Standard Deduction) in your tax return, but not both. Caroline will claim standard deduction as its amount is more than itemized deduction ($2100)