I work full-time as a Christian camp counselor, however, I had a quick question
ID: 2498027 • Letter: I
Question
I work full-time as a Christian camp counselor, however, I had a quick question on some income I made on the side.
I do tarot card readings for some friends, pretty much on a "hobby basis" and made about 5,000 of income (paid in cash).
I don't really consider it as a business where I keep records, and I don't really conduct myself like a true business, but I did have about 10,000 of expenses (classes I took, association dues, travel etc).
I was reading somewhere online that there is different tax treatments in regards to business vs hobby income/expenses. If I consider the tarot reading a hobby then can you please answer the following questions:
1.) On what line of form 1040 should I report my tarot reading income I earned in cash?
2.) Can I net my income and expenses to show a 5k loss on my tax return?
3.) If the answer for #2 is a no, then would I be able to deduct any of the expenses on my tax return somewhere? If so, how much can I deduct?
Explanation / Answer
"Other income” is reported on line 21 of form 1040. Within certain limits, you can usually deduct ordinary and necessary hobby expenses. An ordinary expense is one that is common and accepted for the activity. A necessary expense is one that is appropriate for the activity. Generally, you can only deduct your hobby expenses up to the amount of hobby income. If your hobby expenses are more than your hobby income, you have a loss from the activity. You can’t deduct the loss from your other income. Thus the 5k loss cannot be deducted from other income. Generally, you can only deduct your hobby expenses up to the amount of hobby income.