Business Income

What is Hobby Loss Rules ?

What is Hobby Loss RulesThe term “Hobby Loss Rule” is quite significant and basically states that the expenditure  to pursue a recreational activity which is not recouped as the law allows deduction of expense only to the extent of income earned by the hobby or recreational activity.  Internal Revenue Code (IRC) §183  provides the law to  curb perceived loss deduction abuses by hobbyists. Simply put , while in case of a  business activity , one gets deduction of  all expenses/losses incurred even if there is no profit , the same benefit is not available if the  activity is treated as hobby .In case of hobbies , the expenses related to the hobby are only deductible up to the amount of any income you earned from your hobby. This is termed as  hobby loss rules . The hobby loss rules apply to individuals, S corporations, trusts, estates, and partnerships, but not to C corporationsRead More »What is Hobby Loss Rules ?

How Section 179 Deduction Saves a lot of Taxes!

Section 179 DeductionFor small business , section 179 deduction is great !The Tax Cuts & Jobs Act has amended depreciation rule under section 179 of the Internal Revenue Code to allow the claim of $1,000,000 of depreciation from $ 5,00,000 allowed earlier.Even the bonus depreciation is now 100 percent. The TCJA has further increased the equipment purchase limits to $2.5 million. 

What is IRC Section 179 ?

Section 179 deduction is basically claimed of depreciation in one year . Simply put, Internal Revenue Code allows a business person to claim 100 % of expense on certain types of capital expenditure i.e on buying assets for use in business. This is unlike other capital assets where the full depreciation is not allowed. So section 179 expense has a direct effect on lowering your business profit and consequently results in huge savings on tax payments.For example, if you buy a car for $ 50,000 for business purpose and immediately used, you can claim $ 50,000 as the deduction under section 179 by opting and attaching the form 4562 with your tax return.Read More »How Section 179 Deduction Saves a lot of Taxes!