Question

Kelsey enjoys making cupcakes as a hobby and occasionally sells them for parties. Kelsey receives $1,000 in revenues from cupcake sales this year and pays $1,300 for supplies. Kelsey takes the standard deduction each year. The net effect of the cupcake activity on Kelsey's taxable income isA) $0.B) an increase of $1,000.C) a decrease of $300.D) a decrease of $280.

Answer 1

Answer:

B) an increase of $1,000 (based on the new tax cut)

A) zero for years ended December 31th 2017 or before.

Explanation:

On the recent tax cut of 2018 the hobbies deduction was negated.

The itemized deduction for hobbies is no longer valid in the new fiscal system.

In the previous tax laws Hobbies weren't treated as business as they seek enternainment not profit. It was available to deduct up to the revenues generates from the hobbies.