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The following article was published in our article directory on April 13, 2012.
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Save $1,500 instantly by making your Hobby into a Hobby Business

Article Category: Business

Author Name: Mike Olaski

Save $1,500 instantly by making your Hobby into a Hobby Business

Hobby or Business? That is the Question. Since the dawn of income taxes, we, the over-worked tax-payer have tried to find ways to create a tax deduction from what we love to do. The Hobby Tax isn't a tax per-se, but, since we spend a great deal of our discretionary income on the things that we love to do (our hobbies), and since those Hobby Losses are not tax deductible, it sure feels like a tax. The solution for many, has been the Hobby Business.

What is a Hobby Business?

This is really a question of what is a Hobby Business, then and now. Until the age of the BLOG, the Hobby Business was some tiring effort at turning your hobby into a traditional business. Too often this effort would lead to the love for one's joyful pastime turning into resentment that what we once loved to do is now work. This is mostly due to the fact the most business owners are really "Job Owners" and end up a slave to their self inflicted job. (Read The E-Myth by Michael Gerber). But, along came the blog, which would spell the end to setting up a store, paying rent, hiring employees, and doing all the grunt work of a "Traditional Business". Now, the "Tradigital Business" is, well, digital. And so a Hobby Business can now be as simple as writing about what you love. Let me repeat this. No store. No staff. No headaches. Only the time to do what you love, and then a little more time talking about it (writing a blog about it).

The Taxman and the Hobby Business

Before I write any more on this subject it's time for the good old fashioned disclaimer. I am not an accountant, or a lawyer. Get some real advice about this please. BUT, I have talked to many accountants about this, and they are all shocked when they realize this simple truth. You see, the burden of a business in the eyes of the taxman is "potential to earn revenue". This is because entrepreneurs need incentive, or rather protection against penalty for trying to launch a business. Most business have losses for months, even years. In fact major, MAJOR business have never turned a profit. LinkedIn was just valued at 6 billion dollars in their fantastic IPO and they have NEVER had a profit. Of course there is a fine line here. These "Hobby Losses" must be defensible. If you're asked about your hobby business, you need to be able to convince the average person that the hobby business is a real business, not just a hobby in disguise.

How to Save $1,500 Instantly by Making a Blog About Your Hobby

Speaking of the average person. The average american household, according to the US department of labour, earns around $63,000 per year. The amount of taxes paid varies by different calculations but averages around 18% of this income or $11,340. If you look close at the image "Where does the Money Go" you'll see that many of our expenditures are discretionary. The money we spend on things like entertainment alone is an average of $2,600. But there's so much more, like books, alcohol, tabaco, shopping and apparel. There's even a category for miscellaneous ($800). Now this list need to be broken down better to things like: Kids Football, Golf Trips, Gardening Supplies. These are the itemized discretionary expenses, or Hobby Expenses that we can write off if we have started a Hobby Business out of the subject. Even the big categories that aren't traditionally tax deductible can be written off as hobby expenses including: home entertainment / media, home decorations, home improvement, children's clothes and toys and even eating out. In fact, there is not reason you should ever pay a tax again! So if you spend $4,500 dollars per year, and your tax bracket is 30%, I would suggest your tax savings might be $1,500 per year. Every dollar that you can write off, is no longer taxed at your personal tax rate. Here's a list of both the most popular hobbies and the most expensive hobbies so you can get motivated to see where you create some tax deductions. And keep this in mind: Just because you don't have any of these "Hobby Expenses" now, doesn't mean you can't just go ahead and start doing them. In fact, I am launching websites on how to fly, how to surf, and the best places in the world to travel, not only because I want to do those things, but also because I want to not have to pay for them, or at least to not be taxed because of them. The Hobby Tax is now abolished. Repeat after me:

I will never pay the Passion Tax again!

Here's a list of the top expenditures from the average consumer as listed on tax returns:

1. Transportation $8,758.00 17.6 No
2. Reading $118.00
3. Cash Contributions $1,821.00
4. Entertainment $2,698.00
5. Food $6,133.00
6. Alcohol $457.00
7. Insurance Pensions $5,336.00
8. Education $945.00
9. Apparel & Services $1,881.00
10. Personal Care $588.00
11. HealthCare $2,853.00
12. Misc $808.00
13. Housing $16,920.00
14. Tabacco $323.00
15. Discretionary $6,873.00

I have listed only a few of the Most Popular Hobbies 25 of the list of 50 I found.

Reading
Watching TV
Family Time
Going to Movies
Fishing
Computer
Gardening
Renting Movies
Walking
Exercise
Listening to Music
Entertaining
Hunting
Team Sports
Shopping
Traveling
Sleeping
Socializing
Sewing
Golf
Church Activities
Relaxing
Playing Music
Housework
Crafts

These Most Expensive Hobbies are perfect targets for the Hobby Business Tax Refund

Big Game Hunting
Sailing
Mountain Climbing
Polo
Boat Racing
Hot Air Balloon
Art Collecting
Drag Racing
Flying
Dressage
Ballroom Dancing
Comic Book Collecting
Camel Racing
Making a Website (Irony at it's finest)
Collecting old Technology (cameras)
Collecting Memorabilia
Tornado Chasing
Home Brewing
Flying Helicopters (real and toy)
Skydiving
Car Collections
Faberge Eggs
Stamp Collecting
Jef Packs
Geo Caching
Expensive Vices (Habits and Addictions)

How to create a Hobby Business

The secret seven steps to the MoneySite hobby tax refund are as follows:

1. First, you need to itemize your personal expenditures. Here's a great resource for some inspiration about the average income expenditures for a consumer unit by the U.S. Department of Labor. The average consumer unit in the U.S. has an income of $63,000 and $18,000 in average taxes. That comes right off of the top, immediately from their income. There's $50,000 in average expenditures and note that is $5,000 more than they have available. This seems obvious because we're all carrying debt these days.
2. The next step is to recognize one of these expenses that is extraordinarily fun and extraordinarily expensive. Looking at this list of expenditures, these words seem like expenses, they seem like they're from an accounting spreadsheet but if you dig deeper into them and rephrase some of them you'll find that these are actually indicators of hobbies. Hobbies like gardening and sailing and golfing and surfing and flying and mountain climbing and skiing. That's a lot of hobbies out there, but there must be one hobby that rules your world. For example, the vehicle expense; that's a big one. And we all have cars, 1.9 of them in fact, on average.
3. Now that you have identified an expensive hobby the next thing that we're going to do is to set up a hosting account. It's about as easy as setting up a Facebook account or an email account. It's a service that displays or hosts Web sites. They're about $10 per month or so
4. The next step Is to buy a domain name. They're even cheaper, at $10 per year. Grab a domain name that describes your hobby expense or your hobby topic. That will be the address of your MoneySite.
5. The next step is to install and configure WordPress, which is a piece of software that will run our Web site. It's totally free and it comes with a one-click installer. It's super powerful and super easy to use. One-click installer; sounds easy right? It is.
6. The next step is to write about or reference important news, tips or events about our hobby topic.
7. While we're at it we're going to refer people to our favourite books or products related to our hobby topic and that are listed on amazon.com

Now that you know you can write of your hobby loses from your hobby business, why not claim your hobby tax refund by launching a money making website about your hobby. You'll have fun and make money, but also save a boat load of tax dollars from your hobby expenses at the same time.

Keywords: Hobby Business, Hobby Tax, Hobby Expenses, Hobby Loses

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