It's tax time. Taxes confuse me. I think my taxes should be very very simple, but the software (TaxCut this year) always asks me so many friggin' questions. Though planning for next year, I noted this:
Hobby Expenses Enter the amount of any expenses you incurred in 2004 in the course of your not-for-profit activities, but only to the extent you reported income from those activities. In counting "total expenses" for this purpose, you must include items such as interest that would be deductible in any event. If you have expenses in excess of income from an activity, your tax benefit would be greater if you could deduct them. To deduct expenses in excess of income, you must prove that you had a profit motive in engaging in the activity. You will be presumed to have the needed profit motive if the activity actually showed a profit in 3 of the past 5 years (including 2004). (If the activity consists of breeding, training, showing or racing of horses, the reference is 2 of the last 7 years.) If you can show the needed profit motive, either using this presumption or otherwise, you should report all of your income and expenses for that activity on Schedule C, not here.
Hobby Expenses
Enter the amount of any expenses you incurred in 2004 in the course of your not-for-profit activities, but only to the extent you reported income from those activities.
In counting "total expenses" for this purpose, you must include items such as interest that would be deductible in any event.
If you have expenses in excess of income from an activity, your tax benefit would be greater if you could deduct them. To deduct expenses in excess of income, you must prove that you had a profit motive in engaging in the activity.
You will be presumed to have the needed profit motive if the activity actually showed a profit in 3 of the past 5 years (including 2004). (If the activity consists of breeding, training, showing or racing of horses, the reference is 2 of the last 7 years.)
If you can show the needed profit motive, either using this presumption or otherwise, you should report all of your income and expenses for that activity on Schedule C, not here.
So I simply need to win a few video gaming events, enough to profit for 3 years, and then keep it up to an average of 3 out of each 5 years, and all video game purchases could be deductible?!?!?! Sounds good to me. (If near impossible with my schedule.) Though I expect anyone who blogs, and pulls in enough ad revenue to cover expenses with a bit left over, has some healthy deductions here.
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Disclaimer The opinions expressed herein are my own personal opinions.