Business or hobby? One of a tax professional’s favorite discussion topics concerns whether a taxpayer’s activity is a business or a hobby. There is no black-and-white line at which an activity is called a business or a hobby. The tax effect of an activity falling on the hobby side of the line versus the business side of the line is tremendous, though. Let’s look at the tax effect first and then discuss the reasons or factors that come into play in deciding whether the activity is a business or a hobby. Hobby income, minus the cost of goods sold, is taxable as ordinary income on line 21 of the Form 1040. The remaining expenses are deductible on Schedule A in three different categories. First, those expenses associated with an office in home such as mortgage interest and property taxes are deducted on the normal tax lines on Schedule A. For example, the taxpayer allocates 15% of his home to the hobby. So, 15% of the mortgage interest and property tax are counted as hobby expenses. Second, expenses such as advertising, office supplies, travel, dues, subscriptions and the business portion of telephone usage are deductible as miscellaneous itemized deductions subject to the 2% adjusted gross income reduction. These expenses are deductible only to the extent that line 21 income exceeds the 15% of mortgage interest and property tax. The third category of expense that may be allowed is depreciation. Depreciation is the write-off of the purchase of capital assets, such as computers, scanners and cell phones. This expense is allowed only to the extent that hobby income exceeds both the first and second set of expenses. There is no mathematical way to claim a loss on a hobby, and the expenses that are deductible can be claimed only on Schedule A. That’s important to note because, in a state like Michigan, itemized deductions are not deductible against Michigan income, so Michigan tax is paid on all of the income. On the other hand, business income is reported on Schedule C of the Form 1040 with all expenses being deducted directly on the Schedule C against that income. There is no limit to the expenses that can be claimed. Since the net profit or loss is reported […]
April 5 2012
The public is invited to attend the Rockford Area Arts Commission’s annual spring concert the afternoon of Sunday, April 15. The event takes place in the Rockford High School Fine Arts Auditorium and begins at 1 p.m. Enjoy the talents of the Community Concert Band, Orchestra and Children’s Choir. Admission is free.
Life may just be going to the dogs… hot dogs, that is! The Rockford Corner Bar is partnering with the Sand Lake/Nelson Township Library and Sand Lake Elementary School on Monday, April 16 from 5 to 10 p.m. With a special “Dogs for Dollars” coupon, a percentage of all food and drink purchases will be used to help raise needed dollars for library programs and operations. Enjoy the Corner Bar’s famous “dogs” while growing minds for a love of reading! Coupons are available at the library, 88 Eighth Street, Sand Lake, or can be printed off at www.rockfordcornerbar.com. Go to “Dogs for Dollars” and then select “download extra event coupons.” Simply hand in your coupon with your receipt and the Corner Bar will donate 15% of your purchase to the library. The Corner Bar is located at 31 N. Main Street, Rockford. For more information, contact the library at 616) 636-4251.
Arlo Elkins, Palmetto State tennis icon and longtime University of South Carolina women’s tennis head coach, died Saturday, March 31, 2012 at his home in Columbia, S.C. He was 62. Elkins had served as the head coach for the Gamecocks since fall 1983 and established a nationally prominent program that has reached the NCAA Tournament the past 17 seasons in a row. His teams consistently advanced beyond the first round of NCAAs and made it as far as the quarterfinals. The Gamecocks finished ranked among the nation’s top 25 in 15 of his seasons as head coach. He accumulated well over 400 victories during his career and had a winning record in 22 seasons. His passion to see his student-athletes succeed extended beyond the tennis court as well. Elkins’ teams typically posted GPAs well above 3.0 and as recently as spring 2011, the women’s tennis team led all squads at Carolina with a nearly 3.6 GPA. Multiple times he was named the Intercollegiate Tennis Association’s Region Coach of the Year and he was the first coach in any sport at Carolina to be named SEC Coach of the Year. In 2003, he was inducted into the South Carolina Tennis Association Hall of Fame. Before becoming a coach, Elkins played professionally and competed in the main draws at Wimbledon and the French Open. He also played in more than 50 different countries, and in 1978, Elkins was ranked among the top 200 in the world. Elkins graduated from Northwood Institute with a bachelor of arts in business in 1971. He was a four-year starter for the Midland, Mich. based school at No. 1 singles. Arlo is survived by his mother, Norrine Norman Elkins of Rockford; his wife of 34 years, Tara T. Elkins of Columbia; their children, Alyssa (Sammy) Rhodes of Columbia, Elliot Elkins of Ft. Myers, Fla., Kelsey (Andrew) Mathias of Greenville, S.C.; five grandchildren, Jayne Mac, Asher, Eloise, and Sadie Rhodes, and Charlie Mathias; one brother, Dan Elkins of Atlanta. He was preceded in death by his father, Ardie L. Elkins, and a brother, Larry Elkins. A memorial service was held Wednesday, April 4, 2012, at The Zone at Williams Brice Stadium, Columbia, S.C. Burial will be in his hometown of Rockford. Memorials may […]
Thursday, April 5 Free Meal for Northern Kent County Families—6 to 7 p.m. at the Our Lady of Consolation Family Center, 4865 Eleven Mile Rd., Rockford, every Thursday. No charge; no registration required. Provided by a partnership between Our Lady of Consolation Parish and God’s Kitchen, a program of Catholic Charities West Michigan. Rockford Area Historical Society Meeting—7:00 p.m. at Community Cabin, 220 N. Monroe St., Rockford. Larry Lindsley will present “Civil War Facts We Might Not Know.” Hostesses will be Joan Bunn and Paula Lindsley. Rockford Rotary Club Meetings—7 to 8 a.m. at the Rams Den in Rockford High School, 4100 Kroes St., unless school is delayed or canceled. For more information, call Mark Bivins at (616) 866-1470. Family-friendly Roller Skating Party—2:00 to 4:00 p.m. at Klackles Sports Pavilion, 11466 W. Carson City Rd. (14 Mile Rd. exit off US-131), Greenville. Cost is $5 per skater, which includes skate rental (or bring your own skates or rollerblades). Strollers welcome on the rink. Concessions will be available. Proceeds to benefit American Heritage Girls Troop MI201. Saturday, April 7 Eggstravaganza—noon to 2:00 p.m. at Courtland-Oakfield United Methodist Church, 10295 Myers Lake Avenue NE, Rockford. The Easter egg hunt and crafts begin at noon. A free lunch for all participants begins at 1:00 p.m., with a special Easter story after lunch. For more information, call (616) 866-4298. Free Community Easter Egg Hunt—10:00 a.m. to noon at Victory Church, 6175 Northland Drive NE, Rockford. Over 7,000 candy-filled eggs will be hidden for the largest local egg hunt for every age. There will be games, face painting, indoor bounce houses, a bungee run for teens, food and prizes—fun for the whole family! Tuesday, April 10 Rockford Rotary Club Meetings— 7 a.m. at Rockford High School. For more information, call Mark Bivins at (616) 866-1470. Country & Gospel Music—9:30 to 11:30 a.m. every Tuesday at Rockford Ambulance Community Center, 8540 Shaner Ave., Rockford. Music by the Rogue River Band. Enjoy free coffee, tea and snacks. For more information, call Keith at (616) 866-2459. Free Vegetarian Cooking Class—7 p.m. Samples and recipes. Sponsored by Three Angels Fellowship Church at North Kent Bible Church, 7210 Courtland Dr. NE. Call Amy to register at (616) 481-1596. Thursday, April 12 Free Meal for Northern […]