Making your hobbies tax deductible. Now, I'm not an accountant, a lawyer, or a financial adviser. I'm not qualified in any way to give you tax advice other than telling you things I've experienced myself over many years, and also I've had probably over a thousand lawyers and accountants, either in my mentor program or in audiences, that have cleared this idea as sound. Now, you need to check with your financial advisers, but I think you'll see this is a relatively simple idea, at least in the USA.
NOTE: Complete transcript available at the bottom of the page.
Screw The Commute Podcast Show Notes Episode 292
How To Automate Your Business – https://screwthecommute.com/automatefree/
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Higher Education Webinar – https://screwthecommute.com/webinars[05:05] Tom's introduction to Making Hobbies Tax Deductible [10:11] Getting tax deductions with a side business [12:43] The USA is one of the best countries to start a business [15:46] Here's how the basic idea of starting works [20:33] Getting competent tax advice from a tax professional and attorney [23:35] Using freelancers and making more money than your regular job
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Episode 292 – Hobbies Tax Deductible
[00:00:09] Welcome to Screw the Commute. The entrepreneurial podcast dedicated to getting you out of the car and into the money, with your host, lifelong entrepreneur and multimillionaire, Tom Antion.
[00:00:24] Hey everybody it's Tom here with episode two hundred ninety two of Screw the Commute podcast. Today, we're going to talk about making your hobbies and family interests legitimately tax deductible. How cool is that? You'll be able to do more what you like and get tax deductions for it. I hope you didn't miss Episode two ninety one. Vladimír Adonis was here and this guy spent thirty thousand dollars on his Web site and it was taken off like crazy. I don't want you to spend 30 grand on yours. And he told us his story about how the site got abruptly shut down and how he made his personal comeback. Now, before we get into today's topic, let's listen to what subscriber Mike Shaw had to say about last Monday's episode. Two eighty nine on Website Mistakes.
[00:01:15] Hey, Tom, thanks a lot for a great webinar and podcast on the top 17 mistakes we make on our Web sites. Man, do I have a lot of work to do on my Web sites. Thank you very much. I appreciate your generosity in giving us all this great stuff. Take care and have a great day.
[00:01:38] Well, you're welcome, Mike. Keep listening for more Monday training tips that are going to cause you a bunch of more work. Actually, they'll help you reach the success you wanted to achieve in your business.
[00:01:53] Now, how would you like to hear your own voice here on screw the commute? If the show's helped you out. Check out screwthecommute.com and there's a little blue sidebar that says send voicemail. Click on it. Talk into your computer and you'll get a big shout out on a future episode of Screw the Commute. Hey, put your Web site on there, too. Mike forgot to do that. We'll put it in the show notes for you. Now grab a copy of our automation e-book. This e-book is massively powerful. It's about 60 pages of stuff that saves me millions of keystrokes and allows me to handle up to one hundred and fifty thousand subscribers and 40000 customers without pulling my hair on and allowed me to steal business from other people who took too long to get back to people. It automates all this for you and kind of saved me carpal tunnel syndrome to save me so many keystrokes. So grab a copy of that at screwthecommute.com/automatefree. And while you're at it, grab a copy of our podcast app at screwthecommute.com/app. You can take us with you on the road. Now we're still sitting here in the middle of this pandemic. Just this Friday, our governor in Virginia is making everybody wear face masks in public and so I had to grab a bandana. I don't even have a face mask. So people are working from home now and they're wondering how the heck to do it. And they're like, hey, this is great. Screwing the commute. But maybe I don't have to work for anybody anymore. Maybe I could do my own business online. And that's what I'm all about. Since nineteen ninety four then teaching is since nineteen ninety six living this lifestyle business and it is just beautiful to be able to set your own schedule, deal with who you want to deal with. That's the one thing about me. I don't deal with anybody I don't like. Okay. And you can't get away with that in the typical dreaded J O B. And I started a school about this is the only licensed, dedicated Internet marketing school in the country. It's at IMTCVA.org, that's Internet Marketing Training Center V.A. for Virginia. But you don't have to be in Virginia because it's this is learning at this point. Now we're applying to take the G.I. Bill and we'll have in-house classes around here when that happens. But you can really, really learn the nuts and bolts that I've been using for years to have a great online business, even if you do it as a side hustle to start with. It's very powerful when you start seeing that money come in every morning in your e-mail. Oh, boy, you get hooked that day in a hurry. So check it out. Give me a call if you'd like to discuss your future here or guess what? This would be one of the best legacy gifts you could ever give to your kids, your grandchildren and nephews and nieces so that they're not competing for jobs at Starbucks and buried in debt from some crazy traditional college. So check it out at IMTCVA.org.
[00:05:08] Let's get to the main event. Now, I'm not an accountant, a lawyer, thank God, or a financial adviser. I'm not qualified in any way to give you tax advice other than telling you things. I've experienced myself over many years and also I've had probably over a thousand lawyers and accountants, either in my mentor program or in audiences that have cleared this idea as sound. Now, you, of course, need to check with your financial advisers, you know, and yes, I had to say that, but I think you'll see this is a relatively simple idea, at least in the USA. Now, I haven't had experience starting and running a business in other countries. So you'll have to see how this idea adapts if you don't live in the USA, but I think you'll find it's a pretty universal idea in most modern countries.
[00:06:08] Now, most people have a basic fear of the IRS. I think it starts around two years old. And for those of you in countries outside the USA, that's the Internal Revenue Service or the agency task with collecting taxes in the USA. And most people really do have a basic fear of the IRS because of the vast power they have to really upend your life, both personally and in business. Now, I personally have had little trouble with the IRS, even though I've been formally in business for myself since 1977. And once I got big enough, I started out with a bookkeeper and then I hired an accountant. And having an accountant helps in a couple of ways. It takes an enormous load off your back, keeping up with tax laws, and it also pushes some of the liability onto the accountant or tax professional for your taxes being correct. Now, don't think you can feed the accounting or tax pro fake figures and then put the blame on them. When the IRS decides to throw you in jail, okay, you deserve it for lying. And the tax pro doesn't deserve liability unless what you were doing was so outrageous that they should have questioned it. They should have been that experienced. All right. Now back to the fear factor, the IRS has done a good job of putting the fear of God into the bulk of the population that dutifully goes to work, gets their taxes deducted before they even see the money, and they take home a much smaller paycheck than the value of the hours they work.
[00:07:53] That's kind of how it works in the in the working world. Now, true and savvy entrepreneurs think a little bit differently. True entrepreneurs think, hmm, how can I take full advantage of the laws the way they were written so that I pay the least taxes legally? And here's something you got to keep in mind. Big businesses have lots of money to influence lawmakers, many of whom are, are or were in business themselves. So tax law is slanted in favor of business. And I guess the legitimate justification of making it easier on business is that businesses hire gazillions of regular people. And regular people who don't have their own business are the ones who, like I said, dutifully pay their full taxes and the government gets more revenue and the businesses generate all the worker bees who pay all those taxes. So even if you are a worker bee now, it's not that hard to put your foot on the business side of the fence so that you can get some of these breaks like the people in business do. I think the biggest hurdle to most people is that pesky fear factor of doing something wrong to get the IRS after you.
[00:09:18] Now, even though that's a legitimate fear, there's only a tiny fraction of a chance that you would do something so grievously wrong that your consequences would be serious unless you are an out and out, rip off liar and tax cheat. I mean, about the worst you would get for a mistake would be a fine and a penalty if you're an honest person. The deck is stacked in your favor so that you can take advantage of all those benefits of being in business with very little chance you would have any trouble with the IRS having a side business or the latest lingoes side hustle can do wonders for your enjoyment of life, and it can have great financial benefits. On the upside of bringing in money to you and your family, and that's what this episode is about, tax deductions. So now let's discuss what happens to the typical family or individual who does not start a side business. Now, just about everyone has some hobby or family interest. They participate in care if Fritz from reading books to play in soccer or camping or golfing or even ballroom dancing. Just think of anything you or your family does for enjoyment, even going to the movies whenever we're allowed to, because this pandemic we're in can be a tax deduction. Now, all the money spent on these activities gets, you know, tax deductions and no chance to actually profit from them.
[00:10:57] You simply take whatever money is left after paying tax on it and use it to pay for these activities. Let's just take camping, for example, and look at some of the expenses necessary to take a family of, let's say, for camping. Well, you got to have a vehicle large enough to fit all the gear and the family or a separate vehicle just for camping. You got tense cooking equipment, campground fees, fuel, vehicle mains, insurance, food, beverages, trailer hitches, bicycle's generators, lighting, bug spray, sleeping bags, portable showers, chairs, coolers, heaters, backpacks, toilets. You see out of eight friends, hiking boots, G.P.S. units. And on and on and on. See a real camper, which I am not. Right. It would probably triple this list. Well, everything I put on this list, you must take money out of your pocket and pay for it. You get no credit except for the enjoyment of using the item. Now, don't you think the enjoyment would increase quite a bit if you were getting tax credit and additional income from buying and enjoying all that camping stuff? I think you would. And what about the guilt factor? Many people were made to feel guilty about spending family money and time on things like, let's say, playing golf, for instance. That guilt would be reduced considerably if there were tax credit or even extra income produced because you went to play golf.
[00:12:34] And I don't mean you have to be a great golfer and win prize money, right. To get these tax credits. It's actually much easier than that. When I get into explaining how this works. First of all, this is one of the best countries in the world to start a business. And this is one of the best times on Earth to start one, especially if you concentrate on the digital world, an affiliate world, that's where you recommend someone else's product, then get a commission so you don't even have to make a product yourself to make money. And I've been teaching this this kind of living since 1994 when the commercial Internet started. Okay. Now I'm going to break this down really simply. You can you can go further with this if you want to. But I'm just saying, to start a business in the USA is way easier than you might think. You pretty much just have to decide you are in business marketing and guess what? You're in business. Now, you would keep track of your income and expenses and file in the USA a schedule C profit and loss statement along with your regular taxes. And there you're in business, right? You don't have to start a corporation or LLC. You don't really have to have a business checking account and you don't have to purchase extra insurance.
[00:13:57] Now, you might want to look up your your localities Web site and see if you need a business license, which in most places is a few dollars to get started. Now, I'm not telling you to do this, but many people don't even bother with that in the beginning. And I'm not telling you not to have an LLC not to buy business insurance. I am not saying that. I'm just I mean, it can be a good idea to do so. I mean, your business adviser will help you make those decisions based on the type of business you start. How much money you have. All of those details. But I'm just saying, you don't have to do any of those things to start. And those are the things that keep people from starting. Just keep track of your income and expenses. Of course, if you decided to start a landscaping business with mowers and weed eaters and potential to ruin someone's prized roses, then certainly get the appropriate insurance and licenses. I'm not encouraging that type of business anyway. Well, let's get into the type of business I am talking about, which is extremely low risk for potential of high returns. And even if you don't have big, lofty goals and making a fortune with your side hustle. I mean, if it saved you considerable taxes and you're happy, hey, there's nothing wrong with that.
[00:15:22] Either you and your family get to do the things you enjoy more with less guilt about spending family money on it. On one more benefit, if you have kids, teaching them about business at a young age could totally transform their future into less debt from rip off colleges, more self-confidence that they don't always have to be Holden to that dreaded J. Oby. OK, here's now the basic idea works. I think you'll be amazed at its simplicity and power. Now you're going to put up a WordPress Web site or blog, which should only cost about one hundred dollars to do. If you do it yourself and I'm not an advocate of you spending thousands of dollars on a Web site. I mean, if you took one of my short courses on this, you could make a world class Web site for about one hundred bucks. I'll put that thing in the show notes about how to do it. This Web site is going to be about the hobby or family interest you want to concentrate on. I try to avoid combining more than one on the same site. For instance, I wouldn't want to have a camping and golf site or a golf and soccer site all on the same site. You could, however, have a family activity site and have a whole bunch of family activities on the site. But I don't want to really complicate things for you, though, to get started.
[00:16:47] So let's stick for now to one site for one hobby or family interest. Now we can stick with the camping example. And remember, you are now in business, so you'll want to keep track of money you spent on the business. Your Web site's now up, and I don't want to confuse you anymore with this, but but this can be done without a Web site at all. You can simply start a YouTube channel or Facebook page where you drive people to buy an affiliate product. I mean, there's all kinds of ways to do this. But anyway, you'll do better. And in the long run, it'll be much better for you and more lucrative if you have a Web site. But you don't have to have one to start. So let's say there's a new camping stove you've been wanting to get, but you just didn't want to spend the money just yet on. Go ahead and buy the stove. And here's another thing. I'm not advocating throwing money down the drain, going on a buying spree. You still have to be responsible with this idea. So by the stove, you were going to buy anyway and then review it on YouTube. You can put a copy of the video on your blog and make sure your reviews are honest on the things that you liked and didn't like about your camping stuff.
[00:18:05] Now, while you were in the mindset of camping stoves, you could talk to other campers at your camp site and ask them what kind of stove they use and what they liked and didn't like about their stove. This is pretty much a blog post on. You could call it five best features to look for when your purchase, your next camping stuff. Okay. All right, so so far, you've purchased a camping stove, reviewed it on your YouTube channel and blog, and put up a blog posting about camping stoves, but you really haven't made any money, right? See if you do all this stuff and never make any money. The IRS will call what you are doing a hobby and disavow all your tax deductions. That's not good. So how do you make money from this example? Well, you could join Amazon's affiliate program and put a link in your YouTube description and your blog leading to where people watching your video or reading your blog posts can purchase this stuff from Amazon. And then you get a commission from Amazon and now you're in business. Now you can take it a step further, which I highly encourage, and turn your blog post along with some other research you could do online into an e-book on camping stoves. You then sell it off your Web site and get more money than your affiliate link from Amazon would pay.
[00:19:29] Then rinse and repeat, right, for just like the shampoo bottle says, rinse and repeat for other camping gear. You either already have or planned on buying anyway. Now, here is how things get even better if you start getting enough views on your reviews on YouTube. Companies will start giving you camping gear to review. How great is that?
[00:19:54] Now you're getting tax deduction and you're making money from affiliate commissions and e-book sales and you're getting your equipment for free or for you know, if it's super expensive equipment, they might loan it to you so you can use it for free. And here's the deal.
[00:20:10] No IRS law says you have to be good at business and make a ton of money. You just have to be legitimately in business trying to make money. Many times if you just break even on the income from your hobby in what you spent, you still win because of the tax deductions and the time spent enjoying your hobby, your family interest. I saw us talk a little bit more about the deductions. There are many perfectly legitimate tax deductions you can take if you did the above scenario about camping, your substitute, whatever hobby you want in here.
[00:20:50] And again, I emphasize getting competent tax advice from a certified tax professional or lawyer. Keep in mind, by nature, they're conservative and say no to everything. All right. So so entrepreneurs have to find the right kind of attorney and accountant that will, you know, wants to play the game. And rather than just disavow everything on, you know, they've killed more deals than they've ever made. All right.
[00:21:16] Now, things get a little fuzzy when you have a small business and you use some of your business assets for both business and personal use. This is where you should get with your tax pro and work out some of these things and review them each year, because as your business grows, the numbers might change. For instance, let's say you have an SUV that you used to take the kids to school, but you also use it on your weekend camping trips. Well, a percentage of the expenses of operating that vehicle are for personal use and a percentage are for your business. Maybe in the beginning, your tax pro tells you that 90 percent personal and 10 percent business is reasonable. When it comes to taking deductions for your business, some tax pros may have you actually calculate the mileage spent on personal as opposed to build. So now, instead of getting zero credit, when you go camping, you get 10 percent of your vehicle expenses as a tax deduction. Of course, I'm simplifying this for you to so you get the idea across. But I think you can see 10 percent is better than nothing. All right. Maybe you increase your camping side. Housel in the tax pro now thinks, well, 25 percent or even 50 percent is a reasonable split. Maybe you get a home office deduction for setting aside an area to do your business and store your camping stuff and write your e-books and reviews and manage your website and YouTube channel. Maybe you hire a writer to write the reviews. Maybe you hire an editor. You make your to to make your videos look better. Yet you have Web site hosting and maintenance and office supplies and pencils and pens and tons of other things that can be used for more than one thing, but legitimately are also used in your business.
[00:23:11] Let's say you were reviewing prepackaged camping food while you were going to buy food anyway, weren't you, for your camping trip? Now you either get it for free from a company that wants you to review their food or you buy the feud, review it, which makes it a legitimate tax deduction.
[00:23:30] You see how this works. You get legitimate tax deductions for things you were going to be purchasing and using anyway.
[00:23:39] Let's jump over to another topic, like maybe your kids are in soccer. Well, all this stuff you buy soccer shoes, socks, shorts, shirts, soccer balls, goals, all that stuff, plus travel to practice and matches all costs money. The clothing is the same as the camping equipment. Review it and eventually get it for free from other companies. The e-book could be interviewing the soccer coach and the parents. Maybe you call it the parent's guide to helping your child be better at soccer. Someone else gave you all the information for the book, you just wrote it up or had a freelancer write it up. You can use a site called UpWork.com, which is where freelancers will do stuff dirt cheap. They bid on your job and and they have reviews and all that to make sure you get a good person. But it's all relatively cheap to do. Takes a load off your back. You still you know, you get a tax deduction for hiring the person and you still enjoy more of this stuff your family likes. And you like this just beautiful diet. And it's the same with boating, fishing, archery, hiking, basketball, wrestling, martial arts, knitting, sewing, singing, musical instruments, exercise. I mean, there's there's thousands of thousands of things that if you enjoy it, you can do this idea.
[00:25:03] Classic cars and any other hobby or family interest you can think of. So that's a method, folks. You put up a Web site, Endor YouTube channel, do reviews, get affiliate commissions, create your own products if you want to. All about the hobby or family interest you love. If you do it diligently enough, you may get to the point where doing your hobby is making more money than go into your job. And at that point, guess what? Screw the commute and go full time or add other hobbies and do the same method again. And if you wonder if I've done this myself or if I'm just giving you some obscure theory, you're wrong. Yeah, I have done it myself. Three major times. One is called fatsotennis.com for the people overweight. Now to shape people that love tennis. I'm hold my hand here. Protectiondogselite.com. These are expensive protection dogs that I get a commission when I sell one. And brutalselfdefense.com, which is I've been in martial arts and self-defense my whole life, been in gun fights and knife fights, bikers trying to kill me when I had the nightclub. So I've been studying this my whole life. And I thought, hey, guess what? This could help a lot of people. So I put it out as a Web site. I got to buy a lot of stuff that I wanted to use during the seminar. I did. We videotaped it and now it's a membership site. Brutalselfdefense.com. Yes, you can do this. It's not that big a deal. Just take that first step and and, you know, get with your tax advisor and tell them what you're going to do. But again, keep in mind, most of them are highly conservative and niks more deals than what they do, what they make.
[00:26:53] Now, how would you like a free strategy session all about the business? You want to start the business, you want to improve. How about that? Well, if you qualify and it makes sense for both of us, I'll review what you have going or what you're planning and get on a zoom or phone call with you and give you a customized strategy session. So check out the application for this at screwthecommute.com/application. I'm a person that doesn't like tire kickers, you know, so you better be serious about this and do exactly what the application says. Fill it out completely. And if it makes sense for both of us. I'll do this for you. All right. I'll catch you up on the next episode. See ya later.