Tax write offs part time breeder ?

[Jeff Krupa]

If someone breeds snakes and makes a little bit of money by doing so ,are they are able to claim their overhead for tax reasons ? Heat, food, advertising, etc..... Feel free to pm if youd like with a response. Thanks

[HypoPita]

I've been wondering the same. I would think that you would have to do a couple of things: be incorporated (make it official and cover your butt), keep impeckable records, and most importantly report income/pay tax on your transactions. I don't see why you couldn't use them as write-offs so long as those requirements are fulfilled. I was talking some with my dad about that. To give some background, he's a high up in the accounting area of a large company. He's delt a lot with things like that, though I wouldn't say he's an expert. We didn't get too far in depth about it, since I dont have to worry about those issues yet, but it seems prefectly plausable. Kinda like if you deliver pizzas, or are a realtor, a gps is tax deductable. I'm sure you can find some information about tax write-offs and the requirement of such just by googling it. It has to be on the goverment website. I'll have to check that out when I get home. Definately will get back to you.

Sorry I couldnt be more of a help to you. Theres no chair here, and I am literally running out the door, but thought I'd try to help out atleast a little bit. I'm interested in hearing from the others.

-Pita

[JohnNJ]

Maybe, if you run it like a real business and not a hobby. There are rules so ask a tax accountant.

BTW, you can claim anything you want on your tax return. It only becomes an issue if you get audited.

JohnNJ

[Sebrina]

Your first of all would have to become (if you already aren't) an official business and register as such, an LLC (Limited Liability Company) I would recommened over an INC (Incorporated Business) unless your ready to do alot more paperwork. Afterward you would need to keep immaculate records of every transaction you have made SINCE becoming an true business (they can and WILL come back at you HARD if they find your keeping transactions from them). After you have done both and can produce sales receipts and have all your taxes paid in FULL you can come back at tax season and file a small business tax form when and IF you are approved you can write off business expenses such as gas, heat, food (<-- not sure on this one), and maybe more an accountant is highly recommended and would know what exactly you can and can't write off. Most of your write offs should be written to your company name and not you as an individual, this is especially important if your planing on going Incorporated.

I don't know much about the snake buisness but I keep 3 on the book retail auction businesses and I am able to get tax breaks on alot of things.

[Jeff Krupa]

Thanks for the replies and I hope to get some more. My wife already runs a liscensed buisness out of our home for 10 years, So I know about llc and what not.Just thought about looking into it as the new year approaches us. I dont plan on even breeding one snake in 09, just trying to gather some info to hopefully set up a solid buisness plan someday down the road

[broadude]

I work full time and run this business. I am incorporated. I get tax write-offs, but I also pay a business tax (livestock).

If you don't do it correctly or do not make sales, you may still have a hefty tax bill at the end of the year. Mine was 900.00+. Make sure you get a tax person that understands that your goal is to SAVE money so they can look for ways and explain those ways to you.

[Colin Vestrand]

you would not necessarily have to be an LLC or incorporated... you can be a sole proprietorship, which is much easier to set up. since most people put up their own money to finance their part time breeding operation this works out just fine.
as long as you have receipts to back up your claims, you can write a ton of stuff off... i'd recommend finding a good business tax professional that will work with you throughout the year - it makes it much easier on you and them and it will save you money.

[broadude]

I work full time and run this business. I am incorporated. I get tax write-offs, but I also pay a business tax (livestock).

If you don't do it correctly or do not make sales, you may still have a hefty tax bill at the end of the year. Mine was 900.00+. Make sure you get a tax person that understands that your goal is to SAVE money so they can look for ways and explain those ways to you.

ouch..I mean I am LLC.

[JohnNJ]

http://www.irs.gov/newsroom/article/...169490,00.html

Business or Hobby? Answer Has Implications for Deductions

FS-2007-18, April 2007

The Internal Revenue Service reminds taxpayers to follow appropriate guidelines when determining whether an activity is a business or a hobby, an activity not engaged in for profit.

In order to educate taxpayers regarding their filing obligations, this fact sheet, the eleventh in a series, explains the rules for determining if an activity qualifies as a business and what limitations apply if the activity is not a business. Incorrect deduction of hobby expenses account for a portion of the overstated adjustments, deductions, exemptions and credits that add up to $30 billion per year in unpaid taxes, according to IRS estimates.

In general, taxpayers may deduct ordinary and necessary expenses for conducting a trade or business. An ordinary expense is an expense that is common and accepted in the taxpayer’s trade or business. A necessary expense is one that is appropriate for the business. Generally, an activity qualifies as a business if it is carried on with the reasonable expectation of earning a profit.

In order to make this determination, taxpayers should consider the following factors:

*Does the time and effort put into the activity indicate an intention to make a profit?
*Does the taxpayer depend on income from the activity?
*If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?
*Has the taxpayer changed methods of operation to improve profitability?
*Does the taxpayer or his/her advisors have the knowledge needed to carry on the activity as a successful business?
*Has the taxpayer made a profit in similar activities in the past?
*Does the activity make a profit in some years?
*Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?

The IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year — at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses.

If an activity is not for profit, losses from that activity may not be used to offset other income. An activity produces a loss when related expenses exceed income. The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. It does not apply to corporations other than S corporations.

Deductions for hobby activities are claimed as itemized deductions on Schedule A (Form 1040). These deductions must be taken in the following order and only to the extent stated in each of three categories:

Deductions that a taxpayer may take for personal as well as business activities, such as home mortgage interest and taxes, may be taken in full.
Deductions that don’t result in an adjustment to basis, such as advertising, insurance premiums and wages, may be taken next, to the extent gross income for the activity is more than the deductions from the first category.
Business deductions that reduce the basis of property, such as depreciation and amortization, are taken last, but only to the extent gross income for the activity is more than the deductions taken in the first two categories.

Further information is available in IRS Publication 535, Business Expenses

[PythonWallace]

I just set up a separate business checking account and keep good records of all purchases, expenses, sales taxes and sales. Then I went into H & H Block and told them what I was about. They had me fill out an extra form and I was able to write off a lot of deductions for breeders, racks, food and accessories like thermostats and heat tape. I told them that I didn't have any idea what I was doing as far as the taxes for my business/hobby, and I got the audit insurance. I got a decent amount back, and if I ever get audited and there were any mistakes other than my records, H & R Bloack will give me a lawer and take responsibility for them. I was just clear up front about not having a business license and didn't lie about any expenses or sales.