Can she do this?

[questions]

I have a friend that has a blog about grocery shopping, the food she buys and the meals she makes. She spends about $600 a month on food and her blog makes about $600 a month.

She says that she doesn't have to declare any of her income to the IRS because the food that she buys is needed for the blog she writes, so she can deduct it as an expense. So she is basically getting her food for free because she would have to buy it even if she didn't have a blog about it.

Is this true? Can I write a blog about traveling and then not pay for any of my travels because it is part of what I'm blogging about?

[frito833]

Seems pretty far fetched. Your friend might be able to get away with it because to the IRS, that is really small change and doesn't raise the audit flag.

[terry1156]

She does needs to declare the income, but she may be correct that she doesn't need to pay any taxes on it. I think it would depend on how she blogs about the food she buys. If the food is purchased in a way that is specific to the blog such as meals created specifically for a blog post, it can probably be declared as an expense. Food that she buys that never makes it into the blog probably can't.

[NickLeavens]

What she thinks, and what the IRS thinks about it are likely two completely different things. She 'should' report that income, and technically, she'd have to report the 'food' as business expenses- although I don't think that would fly very well. Considering it's only $600 a month, I think she'd be risking more than it's worth by not reporting it.

[PetMom]

Has she had an IRS agent tell her this?

Or a reputable accountant (they can make mistakes also).

I would call the IRS and discuss this with an agent. Find the applicable tax rules and ask for those in print. They have such levying power if they ever decide you are making a mistake on your claimed income.

It is true business deductions can be made - but that takes a lot of personal record keeping and there are rules on this - not a vague generalization.

People used to get a 'paying hobby' which means they would try to claim their hobby as a business and deduct all sorts of basic expenses that had nothing to do with the business- but the IRS made rules on how this is done.

I definitely agree with the poster who said not paying taxes on $600.00 a month is not worth it.

She should be prepared to sit down with an auditor and her records and blog and go through everything to prove this is a valid deduction.

[MonkeyMama]

She's pushing it. For the record, $600/month is NO small beans to the IRS. That's $7k per year!!!!

The basic rules on hobbies are that losses are not allowed, but income has to be reported. That's their basic rule on most things.

The income would have to be reported. She may have a valid that some of her grocery bill is a deductible expense (deducted against income). I have a hard time believing that her entire grocery bill is a valid deduction.

I am a tax professional, and you wouldn't believe the doozies I hear. A lot of people believe a lot of false things about taxes (heck, most people do).

Which reminds me, in general, anything that has both a personal and a business benefit, is usually not allowed as a business deduction. If she came to me I'd probably advise to report the income and not to report any of the groceries as an expense. Pretty much, anything you would buy, regardless of your business, is not deductible. Groceries are clearly in that category. It's a personal expense, blog or not.

[swanson719]

The argument "I use it for my business so I can deduct it as an expense" is one thing, but that still doesn't mean you don't declare it. That's like saying you know you're going to about break even on business taxes, so you're not going to file. Once and a while something small might slip through the cracks, but bigger companies certainly won't. Something like this also prevents her blog from getting big, because if she were to post a $3,000 a month return on it, profit or not, it then has become a taxable business in it's own right aside from personal income. Without having filed taxes on it, and no LLC documents or something, it quickly becomes difficult to substantiate when the blog was established as a business, and opens you up to both a business and personal audit.

[disneysteve]

The basic rules on hobbies are that losses are not allowed, but income has to be reported. That's their basic rule on most things.

Isn't there something about showing a profit within 3 years to call it a business and not just a hobby?

To the OP, if your friend has $600 in income and $600 in expenses, I don't think that would qualify as a business since she isn't making any profit.

[marla]

I have a question about this. If you have a home business, I heard that you can deduct a portion of the electricity, water and gas bill as an expense. So, if you use 10% of your house for the business, you can deduct 10% of your electricity, water and gas bill. This is even though you would need to pay for these even if you didn't have a home business. Is that right?

If it is, how is this any different. Her "business" is blogging about food so shouldn't at least a portion of that food be deductible as a business expense? Without the food she is blogging about, she wouldn't be making any money.

[Seeker]

In all of these, the answer is: "it depends"

If you or anyone, has procured a business license to do this ("blogging" can be considered a valid business), then the IRS does make some provision for it. Not usually 100%.... but some provision.

Look up the tax codes. Business or Hobby? Answer Has Implications for Deductions

And yes, costs/expenses and taxes have to be fully documentated.

Most bloggers, in my mind, are not turning a profit in the whole scheme of things.

[illinigamer]

I have a question about this. If you have a home business, I heard that you can deduct a portion of the electricity, water and gas bill as an expense. So, if you use 10% of your house for the business, you can deduct 10% of your electricity, water and gas bill. This is even though you would need to pay for these even if you didn't have a home business. Is that right?

If it is, how is this any different. Her "business" is blogging about food so shouldn't at least a portion of that food be deductible as a business expense? Without the food she is blogging about, she wouldn't be making any money.

Making an analogy with home office deduction...

I take the home office deduction and, based on the restrictions placed on it, it is intended for those who NEED a home office (for instance, if you have a regular office elsewhere, but occassionally work at home, you do not qualify). If I did not work full time at home, I would be able to live in a smaller house and would not have the additional mortgage, utilities, etc. expenses. The food business situation is different in that she would still need to eat even without her business.

On the other hand, if she did not have the business she could be choosing her meals in a different fashion which could result in significantly lower food costs. Based on this, one could argue that the food is a requirement of her business that she would not have otherwise.

It seems there is a reasonable argument for either side, so I would recommend talking to a tax professional. For the record, I think that the second argument (she can deduct the food) makes a lot more sense, but there isn't always a high correlation between what makes sense and what is the law.

[wincrasher]

As in most things it depends. It depends on how her business is structured.

Most likely she has not set up a corporation (or LLC) with it's own business accounts. If she was making food and then throwing it out or giving it away, you could probably justify an expense. I'm sure a carpentry blog that had to buy tools and wood could justify the expense - this is really no difference.

But if she is buying the food, preparing it and then her family is consuming it, she probably can't deduct that. She could deduct her server expenses, any office equipment, promotional expenses and the like.

For example, if she was going to write about peas. She buys 6 brands and tastes them. She writes her blog and throws them out. I'd keep that receipt and deduct it. If she puts them in tupperware and feeds them to her family, I would not deduct that.

Comingling the personal and professional - the income and expense makes it really difficult to justify a deduction. Essentially if you are comingling the money, then it's a hobby.

[disneysteve]

I take the home office deduction and, based on the restrictions placed on it, it is intended for those who NEED a home office (for instance, if you have a regular office elsewhere, but occassionally work at home, you do not qualify).

That's true. When I was selling on ebay regularly, I took a home office deduction for the space in the house devoted to my ebay business. The space needs to be used exclusively for the business, so if you do paperwork on your dining room table, you can't take a deduction. It needs to be dedicated space. I had about 1/4 of our basement set up strictly for ebay work - shelves with stock, a table where I photographed and packed and weighed items and filed all the paperwork.

[wnlbutterfly]

Exactly as DisneySteve says...a DEDICATED space (and you have to figure up what % you are using compared to the rest of your home...say 10%, then you only deduct 10% of the expenses. And this is AFTER all the other expenses and IF you still have a profit. I have a lot of people bring me all the info for a home business deduction but they have not made any profit (part-time tax preparer).

I have been doing crafts for 20 yrs and been filing a schedule C for it. I only had one year it was a profit. But at the IRS info site you will see that they also look at HOW you conduct business, if you are being professional, have business cards, TRYING to create a profit shows that you are attempting this as a business, versus someone that is just crocheting a couple of potholders and selling them at the local church bazaar. I used to do 15 shows a year. This year I have dropped it down to 1-2 (still waffling on one), so I have decided I will not file this as a business this year, it has now become a hobby (I also sold my craft van).

With the friend and her blog, is this just a past-time fun thing or is she spending a LOT of time doing it. Is the money coming in requested donations or required to view her blog? I think the best thing she could do would be research at IRS website and talk with her tax preparer. Even if she breaks even, it might be worth it to go ahead and start doing a Schedule C, because her blog could start picking up and bringing in even more info next year.

Your example of travel doesn't hold up, she IS paying for her food (you said you wouldn't have to pay for your travel). In your example it would be like your write a blog about travel and people pay you to read it, you pay to travel to those places, then you do a schedule C and report your income from the blog minus your travel expenses. Yes, you could do that.

The main question is can she really deduct ALL of her food purchases just because she writes a blog on food. That can get dicey there. If you buy the stuff to make muffins for the blog, but the kids get to eat it, I would say that expense is okay. But if you are including in your expenses milk and cereal that the kids eat all the time and had nothing to do with the blog, then you better be buying that on a different receipt.

[Goldy1]

It makes one wonder. If someone was making self employment income of a low amount, would it even be worthy to do it at all (do the job)when factoring in additional fees and hassles for more elaborate tax returns and fees.