Hobby-turned-business, taxes?

[Nussman]

Hi all. I have a couple questions regarding the "hobby-turned-business" debate.

So I have personally hit the point where I will be making a non-negligible annual profit on my breeding projects. Thus, I'm interested in creating either a single-member LLC or DBA as a sole proprietor. My initial concern regards accounting for animals, equipment (caging, racks, incubators), etc. that I have already purchased. The bulk of my purchasing occurred in 2013 & 2014.

From my understanding, I will be depreciating these "assets" over some time period, and writing them off following standard depreciation protocol. I've seen a 5-year depreciation schedule referenced for animals in a few instances. Does anyone have some experience with this that could share any opinions?

For instance, if I spent $5,000 on animals in 2013, would I be able to amend my 2014 tax return to include a $1,000 depreciation expense? Or is it unfeasible to amend past returns to include that type of expense? If not, I suppose I would be looking $3,000 in assets at this point in time, 2 years after purchase, with 3 years left of "useful life".

Would love to start a discussion on this topic, it has been of interest to me for a while.

[Lizardlicks]

This one is also of interest to me though I don't foresee myself making enough profit to claim as anything larger than hobby. Mostly I'll be buying snakes and equipment for them for a few years before I even hatch my first clutch, and I'm interested to know how to handle that for tax purposes.

[Coluber42]

I don't know about amending previous years' returns, since I haven't done it; that sounds like a question for an accountant.
But it shouldn't make any difference whether you are a single-member LLC or a sole proprietor. Since an LLC is a pass-through entity, its profits and losses pass through to the members; it can still be treated the same as self employment or sole proprietorship as long as you are the only member. (There may be cases where it is either necessary or advantageous to pay corporate taxes instead, but I don't know what those are) An S-corp, for example, does not work that way, and you have to file corporate taxes.

[spikell75]

I have a carpentry/ painting company so kinda different but file same taxes. I personally only use my truck for depreciation. Easier for me to just write items off as I buy them.. Gets confusing once you have multiple items and many years worth. If your useing an accountant then I would try and save every dollar you can.


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[Coluber42]

I've said it before, but I really recommend Turbo Tax. Among other advantages, if you use it every year it will automatically import whatever you need from previous years. If you are depreciating an asset over a number of years, it will keep track of it for you and carry it over each year, so you only need to enter it in the first time and then it will go by itself until it's done.
I have no idea what the rules are for depreciating breeding animals, but TurboTax will usually put you on the right track for finding out.

[Coluber42]

Double post, sorry