Hobby Vs. Business (Where's the Line?)

[bcr229]

You pay taxes on net income not gross sales.

So, if you sold $14k in babies that's great, but you deduct the cost of your breeder snakes, feeders, the incubator, the snake racks, thermostats, heat tape, substrate, hides, water dishes, vet bills, web hosting fees if you have a web site, advertising fees, travel expenses to/from expos, shipping fees, shipping boxes/insulation/heat packs, etc. etc. etc.

If your expenses are more than your income and you've put business losses on your schedule C for three years running, you're at risk of the IRS going back and saying your business is really a hobby, and then you get hit with back taxes, penalties, and interest. This is why I keep my snake-breeding strictly a hobby and every December I figure out income versus expenses, and if I had a good year I go shopping.