15800: 1040 - Hobby Expenses

The Tax Cuts and Jobs Act implementations beginning tax year 2018 disallow expenses incurred by hobbies. Income must still be reported. Per the Schedule C instructions, "...a sporadic activity or a hobby does not qualify as a business. To report income from a non-business activity, see the instructions for Schedule 1 (Form 1040), line 8, or Form 1040-NR, line 21." This is Schedule 1, line 21 in Drake18. 

Additional resources:

• Tax Reform Provisions that Affect Businesses
• Tax Reform Provisions that Affect Individuals

2017 and Prior

The following applies to 2017 and prior. If you have a hobby that generates income and was reported on your tax return, the IRS allows you to deduct expenses related to this income. You can deduct this as an itemized deduction on Schedule A for the ordinary and necessary expenses up to the amount of related income and in consideration of special rules and limitations. If you do not itemize deductions, you cannot deduct hobby expenses.

The IRS says:

"Allowable Hobby Deduction: Within certain limits, taxpayers 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.

Limits on Hobby Expenses: Generally, taxpayers can only deduct hobby expenses up to the amount of hobby income. If hobby expenses are more than its income, taxpayers have a loss from the activity. However, a hobby loss can’t be deducted from other income.

How to Deduct Hobby Expenses.  Taxpayers must itemize deductions on their tax return to deduct hobby expenses. Expenses may fall into three types of deductions, and special rules apply to each type."

See IRS Small Business Week Tax Tip 2017-04, for further details.

Additional resources:

• Publication 535
• About Schedule A