Please help answer: I work full-time as a Christian camp counselor, however, I h

Question

Please help answer:

I work full-time as a Christian camp counselor, however, I had a quick question on some income I made on the side. I do tarot card readings for some friends, pretty much on a "hobby basis" and made about 5,000 of income (paid in cash). I don't really consider it as a business where I keep records, and I don't really conduct myself like a true business, but I did have about 10,000 of expenses (classes I took, association dues, travel etc). I was reading somewhere online that there is different tax treatments in regards to business vs hobby income/expenses. If I consider the tarot reading a hobby then can you please answer the following questions: 1.) On what line of form 1040 should I report my tarot reading income I earned in cash? 2.) Can I net my income and expenses to show a 5k loss on my tax return? 3.) If the answer for #2 is a no, then would I be able to deduct any of the expenses on my tax return somewhere? If so, how much can I deduct?

Explanation / Answer

1) Hobby income can be shown under Other income and is reported on Line 21 of Form 1040 when you file or efile your tax return.

2) You can deduct hobby expenses up to the amount of your hobby income. upto $ 5,000 . you can usually deduct ordinary and necessary hobby expenses. An ordinary expense is one that is common and accepted for the activity. A necessary expense is one that is appropriate for the activity.

Explanation:

In general, you are allowed to deduct ordinary and necessary hobby expenses (with certain limitations). An “ordinary” expense is one that’s considered common and accepted for the activity. A “necessary” expense is one that’s considered helpful and appropriate for the activity.

Since a hobby is not a business, hobbyists are not entitled to the same tax deductions that businesspeople can claim. As a hobbyist, you can usually deduct your hobby expenses up to the amount of your hobby income. But any expenses that exceed your hobby income are considered personal losses and are not deductible from your other income.

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