I would like to buy about $5,000 worth of mucial and recording equipment which I consider mostly a hobby but may generate about $500/year. Can I form a business, claim those peices of equipment ascapital expenses, and claim a NOL on my taxes? will I get 100% back if I don't show a profit? Also, can I depreciate the equipement as well?
2007-04-10 17:59:33 · 4 answers · asked by Chris 2 in Business & Finance ➔ Taxes ➔ United States
I guess I should have specified that I have a very healthy income from my regular job and paid a lot of tax in 2006. I would run my music production business for maximum profit if time would allow, but it currently doesn so I don't project that I could be very profitable for the first few years w/ my equipment investment. I was just hoping I could get a tax benefit and have never claimed that type of deduction before. Thanks for your input!
2007-04-11 05:48:24 · update #1
Deducting Hobby Losses From Your Income
For most business owners, losing money for more than a year or so is a clue to close up shop. But if you love what you're doing, it might make sense for you to stick with your business even though it makes little or no money. That's because an unprofitable business can be a tax shelter: If you have another source of income, you may be able to use the losses from your hobby business -- including your expenses and depreciation on assets you purchase -- to offset your other taxable income. Deducting these losses can not only lower the amount of income on which taxes are owed, but also drop you into a lower tax bracket.
2007-04-10 18:03:42 · answer #1 · answered by netthiefx 5 · 0⤊ 0⤋
Hobby losses above the hobby income aren't deductible.
If you capitalize purchases, you depreciate them. You can't double-dip and both claim an expense for an item and also depreciation.
Quit trying to cheat. Sounds like the equipment is a personal expense, not a business one - if you're not going to be in business to try to make a profit, then don't claim to be.
2007-04-11 01:10:47 · answer #2 · answered by Judy 7 · 0⤊ 0⤋
I honestly agree with the person above me that says quit trying to cheat lol Believe it or not, our tax dollars do go to somewhat good causes..
BUT.. Technically, if you report that you make that $500 a year on your taxes, you can in fact, claim the $5,000.. But they aren't going to give you a $5,000 deduction.. So you may not get all your money back, and you certainly won't get $5,000 back.. Better luck next year lol
2007-04-11 01:24:16 · answer #3 · answered by idgaf 5 · 0⤊ 1⤋
Nope, as a hobby your expenses CANNOT exceed your income. Since you know what a NOL is, you should know that as well.
2007-04-11 01:24:38 · answer #4 · answered by Bostonian In MO 7 · 0⤊ 0⤋