Happiness is turning your passions into a career.
Often we have things we love to do, but they aren't the day job. The challenge is to figure out how to make money at them. So get started. Start an LLC -- only $50 and a form in some states (Wyoming, for instance, and you don't need to live in that state).
Now you've got a basis for valid tax deductions. 20 - 40% of every dollar you spend trying to make money for that LLC now comes back to you at the end of the year. Is your business promoting good farming practices and offering consulting advice? You might have to travel to New Zealand, Hawaii, Europe, Africa to investigate those practices firsthand, to attend conferences, to make contacts and drum up business, etc. A $5000 trip might have a $1500 tax rebate in the form of deductible expenses.
Even if you don't get the business, you only have to try and show reasonable effort to succeed to qualify with the IRS. Also, technically, you don't need a formal business entity like an LLC, but it lends a lot of credibility if you get audited. They're easy enough to set up in many states to be worth it. Get a tax ID number and you can even make some purchases at suppliers like Home Depot to not pay sales taxes if you're building a home. Or get special discounts with business memberships at places like Costco.
Or maybe you're a writer. Research can require travel, business meetings, etc. All tax deductible business expenses. (Check with a tax accountant if you're not sure, of course.)
Or if you like blogging, figure out how to make money at it... not just selling advertising (that's drying up right now, isn't it?), but maybe you can become a profit-seeking activist promoting a point of view and sell your opinions. This requires you to do research, prepare op-eds, speak in public, travel, network, etc. Expenses can include new computers or dinners with people who can help you make money (even if they are friends) are valid, too. (But of course capital equipment, an office in your house, etc, must be used 100% for the business to qualify for 100% deductibility.)
I'm not sure where the line between business and charitable organization is drawn here, though -- I'm not a tax accountant or lawyer -- but for expense deductions a business has to try to make money. It doesn't have to actually make money, though, to qualify for the deductions. You simply have to try, and show a valid effort.
Of course, if you want the happiness of a career doing your passion, try to make as much money as you can. That's the real goal.
Putting aside the limitations of my knowledge of tax law, the principle is, if you're going to put a lot of time into something, anything that you love to do, you ought to figure out how to make money at it. If you can make enough, well, there's your new career. Who wants to spend their life bottling beer on an assembly line when they can make money doing what they love?
Even if you don't make enough money at your avocation to drop the day job, if you can show you're *trying* to make money, that's all you have to do to gain a little extra income, more freedom for travel and the things you like doing, and some tax savings on the expenses of your avocation. Then try... and then do.
Often we have things we love to do, but they aren't the day job. The challenge is to figure out how to make money at them. So get started. Start an LLC -- only $50 and a form in some states (Wyoming, for instance, and you don't need to live in that state).
Now you've got a basis for valid tax deductions. 20 - 40% of every dollar you spend trying to make money for that LLC now comes back to you at the end of the year. Is your business promoting good farming practices and offering consulting advice? You might have to travel to New Zealand, Hawaii, Europe, Africa to investigate those practices firsthand, to attend conferences, to make contacts and drum up business, etc. A $5000 trip might have a $1500 tax rebate in the form of deductible expenses.
Even if you don't get the business, you only have to try and show reasonable effort to succeed to qualify with the IRS. Also, technically, you don't need a formal business entity like an LLC, but it lends a lot of credibility if you get audited. They're easy enough to set up in many states to be worth it. Get a tax ID number and you can even make some purchases at suppliers like Home Depot to not pay sales taxes if you're building a home. Or get special discounts with business memberships at places like Costco.
Or maybe you're a writer. Research can require travel, business meetings, etc. All tax deductible business expenses. (Check with a tax accountant if you're not sure, of course.)
Or if you like blogging, figure out how to make money at it... not just selling advertising (that's drying up right now, isn't it?), but maybe you can become a profit-seeking activist promoting a point of view and sell your opinions. This requires you to do research, prepare op-eds, speak in public, travel, network, etc. Expenses can include new computers or dinners with people who can help you make money (even if they are friends) are valid, too. (But of course capital equipment, an office in your house, etc, must be used 100% for the business to qualify for 100% deductibility.)
I'm not sure where the line between business and charitable organization is drawn here, though -- I'm not a tax accountant or lawyer -- but for expense deductions a business has to try to make money. It doesn't have to actually make money, though, to qualify for the deductions. You simply have to try, and show a valid effort.
Of course, if you want the happiness of a career doing your passion, try to make as much money as you can. That's the real goal.
Putting aside the limitations of my knowledge of tax law, the principle is, if you're going to put a lot of time into something, anything that you love to do, you ought to figure out how to make money at it. If you can make enough, well, there's your new career. Who wants to spend their life bottling beer on an assembly line when they can make money doing what they love?
Even if you don't make enough money at your avocation to drop the day job, if you can show you're *trying* to make money, that's all you have to do to gain a little extra income, more freedom for travel and the things you like doing, and some tax savings on the expenses of your avocation. Then try... and then do.
I'm not a tax accountant or lawyer -- but for expense deductions a business has to try to make money. It doesn't have to actually make money, though, to qualify for the deductions. You simply have to try, and show a valid effort.
ReplyDeleteIf you haven't made a profit in three years, the IRS will consider the activity as a hobby instead of a business, so there's a limit to the how long you can deduct in that fashion. I was told this by my CPA, as I freelance in my line of work and a lot of that is done on a 1099 basis as business income.