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Originally Posted by bchgirl  Well that's to be expected...not so certain there is some vast profit being made after the numbers are crunched though.
I boggle my own mine when I add up just my expenses in showing my dogs... |
I'd like to make the point (even though I haven't taken tax yet) that just because you claim expenses doesn't mean you make a profit. It is far more likely that a loss would still be incurred or you would break even. Claiming them as business expenses makes you financially better off than where you would have been, but does not mean that you will magically turn a profit.
You fill out the Schedule C form for this sort of thing. You're only allowed to take a loss for 3 or so years because the government says that businesses exist to make money. If you continue to have a loss after that, you have to claim the money as hobby income (whatever it may be), which will be taxed, and you are no longer allowed to claim any business expenses.
For example, you make $10,000 in revenue selling homemade jewelry. You have incurred $20,000 in business expenses. Thus, you have a $10,000 loss. After the 3rd year of this, you can no longer claim any business expenses. So, in your 4th year you would have to claim $10,000 of taxable hobby income from the revenue you generated, but you are not allowed to claim any business expenses.