thanks for the info Tax Lady

I called the IRS, and they told me that I have to list hobby income & I also have to write in on the line....dog breeding on line 21 (1040)

and concerning the deductons on Schedule A line 23:
she said the maximum hobby expenses is hobby income (9550) minus my realestate taxes (700) which is $8850 minus 2% of my AGI

(My real estate taxes goes on line 6 schedule A; we itemize anyway)

and she said I have to list the expenses individually for line 23, food-amount-$$; vet bills-$$, Advertising-$$, supplies-$$, mileage--$$ & total to line 23.

Anyway, I thought I could deduct up to the amount of hobby income, but she said I have to minus off my real estate taxes & mortgage interest if I had any.

please advise; I have been searching IRS publications for hours, and get different answers when talking to CPS

The person at the IRS didn't explain it so that you could understand, or she wasn't answering your question correctly. You actually have about a 50 - 50 chance of them getting it right, sad but true.
If you are hand writing your return attach a sheet itemizing all your expenses (food, mileage, entry fees, vet fees, training classes, leashes, supplements, etc etc) and attach. If you have software, it should print out for you. Make out the list and walk away from it till the next morning, I bet you will think of something you forgot overnight. Just put the RE taxes and mortgage on the appropriate lines on the A, you will get a larger deduction that way. You definitely DO NOT deduct it from your expenses.

Real estate taxes of 700!!!??? Where do you live? Mine are $5000 for less than an acre in the suburbs in upstate NY. I don't know how most seniors can hang on to their property in our area. It's one thing to buy a place but then to pay these taxes year after year....

Thanks for the info.

From what I understand, my food expenses can include all of the dog food I bought all year long, even for my seniors?? yes

Here is what the IRS lady said, the maximum hobby deductions minus real estate taxes & mortgage. Not that I deduct them from Hobby expenses. She said that is how I figure the maxium Hobby deductions.

But put the real eseate taxes & mortgage on the appropriate lines to take off full amount.

Here is the Publication 535 she got her info from:

Not-for-Profit Activities--- page 5

Limit on Deductions---- 3 catagories


I am so confused. I thought I had it figured out, but not now

I know a breeder who was audited. The auditor asked if she still showed her senior. She said no. He said, then you can't deduct her food, and didn't allow the amount of food her retired dogs eat to be deducted.

Now, bear in mind, that doesn't mean he is right, but you would then have to appeal his descision.

It may also matter if you are filing as business or hobby income; I don't know. I would make the argument that my retirees are goodwill ambassdors for my breeding program. I would make the case that they help me sell puppies, because prospective buyers are impressed when they see grandmas and great grandmas to the puppy they are considering.

You can call the IRS and ask them, but like a previous poster said, you still only have about a 50/50 chance of being right. Even if you ask the question, they don't have to honor their answer.

Mike

This is exactly why the tax code needs to be simplified - a flat tax of some sort would be great. The absurdity of the complexity of the rules and regulations regarding taxes is just ridiculous. How is a normal person supposed to do their taxes if the "experts" can't figure them out either!

Amazing!

I don't think the concept of a flat tax has anything to do with this situation. Business profits are totally different from individual income. Business would still have to determine expenditures to calculate profit.