tag:blogger.com,1999:blog-4626545975155581763.post1570005446433407606..comments2023-05-04T05:50:19.612-07:00Comments on True Adventures in Money Hacking: Tax Hacks, Part 3: Self-Employment TaxesWren Caulfieldhttp://www.blogger.com/profile/10396487405768709623noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-4626545975155581763.post-45114930193404629322009-02-09T11:38:00.000-08:002009-02-09T11:38:00.000-08:00For some reason, when I switched the comment hosti...For some reason, when I switched the comment hosting for the site from JS-Kit back to blogger, all comments made through JS-Kit appear under my name. The first comment on this post is by <A HREF="littlemissmoneybags.blogspot.com" REL="nofollow">Little Miss Moneybags</A>.Wren Caulfieldhttps://www.blogger.com/profile/10396487405768709623noreply@blogger.comtag:blogger.com,1999:blog-4626545975155581763.post-4631209525266543932009-02-09T11:36:00.000-08:002009-02-09T11:36:00.000-08:00@ Little Miss Moneybags: The government taxes your...@ Little Miss Moneybags: The government taxes your *total* income, including any profit over $400 (combined) from hobbies. I know it's no fun to pay taxes on it, but that money *is* part of your income, even if it's not a very high percentage of your total income. Luckily for you, there are things you can do to reduce the amount of tax you pay on your self-employment income.<BR/><BR/>First, keep the receipts from any materials or services you purchase for those hobbies. On Schedule C, you can deduct a bunch of these expenses including advertising, office supplies, and even books you use in your hobbies. You might even be able to deduct certain expenses from your home office. (See Form 8829 and Pub. 587).<BR/><BR/>Second, assuming neither of your hobbies is a farm, if your total profits from self-employment were less than $4,548 and also less than 72.189% of your total gross income, you may be able to use Schedule SE's "Optional Nonfarm Method" to claim 2/3 of your gross income (rather than your entire net income). This works best if you deducted a lot of expenses in Part II of Schedule C. This method might also qualify you for the EIC.<BR/><BR/>Even if you can't use the optional method above, there's good news. The income from your hobbies is taxed at 15%, equal to the lowest wage-earner tax bracket, and you get to deduct half of your SE tax on your 1040, thereby lowering your AGI.<BR/><BR/>Hope this was helpful.Wren Caulfieldhttps://www.blogger.com/profile/10396487405768709623noreply@blogger.comtag:blogger.com,1999:blog-4626545975155581763.post-58047132889010118002009-02-09T09:53:00.001-08:002009-02-09T09:53:00.001-08:00This comment has been removed by the author.Wren Caulfieldhttps://www.blogger.com/profile/10396487405768709623noreply@blogger.comtag:blogger.com,1999:blog-4626545975155581763.post-23952105126981491012009-02-09T08:21:00.001-08:002009-02-09T08:21:00.001-08:00I'm always confused by this--I have a full time jo...I'm always confused by this--I have a full time job and two income-producing hobbies. But I have to pay self-employment tax, according to TurboTax. I understand needing to pay federal and state taxes for the income I bring in, but neither of these hobbies remotely supports me (I still feel lucky to be making more than I spend on them!) so I really don't get how I have to pay a self-employment tax on them.Wren Caulfieldhttps://www.blogger.com/profile/10396487405768709623noreply@blogger.com