Question

QUIZLET Kim raises and sells horses as a hobby. She also has income from riding lessons that are part of the hobby activity. Income from horse sales $10,000 Income from riding lessons $5,000 Feeding expense $8,000 Boarding expenses $6,000 Veterinary expenses $2,000 What is the tax impact of this activity? Question 36 options: Include no income; deduct no expenses. Include all income; deduct all expenses. Include all income; deduct expenses up to income Include all income; deduct no expenses

Answer 1

Answer:

Include all income; deduct no expenses

Explanation:

The Tax Cuts and Jobs Act changed the way hobby expenses and income is taxed. Since 2019, any income generated by a hobby is taxed as ordinary income (not subject to self employment taxes) but any expenses related to your hobbies are not deductible any more. Until 2018, you could deduct hobby expenses as long as they were above 2% of your gross income and they didn't hobby income.