Can I recover losses from a business?

Question

I used to run a horse rescue with money out of pocket. I have since been placed on disability and can no longer maintain the cost. I do not owe taxes on my disability, but is there anyway to recover any of the opperational cost from the rescue? We had filed for non-profit status but closed before we recieved it.

Answer 1

Because of the fact that you have operated the horse rescue with the intentions of making a profit (proof of that is that you filed for non-profit status), the expense should not be deducted on schedule C.

You can consider it as hobby income or not-for profit income and you can deduct your expenses on Schedule A subject to the 2% AGI floor. You can not deduct more expenses than you report for income. So if you report $500 in income you will only be able to claim a $500 deduction on schedule A.

The other limit that you will run into is that if all your income is non-taxable than you will have nothing to deduct against.

With all these limits in place you probably at the best will just be getting a warm feeling for doing something good for a while, and not all that much money from the government.

Answer 2

From your question, it seems that you were not operating this horse rescue for profit. Therefore, it is not considered a business activity for tax purposes.

Since it was also not a charity for tax purposes, it would be categorized as a hobby. To the extent you received income from the hobby, you could declare that income on Line 21 and deduct the expenses as miscellaneous expenses on Schedule A. At best, this leaves you with zero tax owed on the hobby.

So, there is no way to recover your out-of-pocket expenses.

Answer 3

IT SEEMS LIKE EVERYBOBY BUT ME IS FILLING FOR DISABILITY WHO ARE THE PEOPLE WORKING TO PAY FOR THIS.