In this week's Ask the Tax Expert, a budding beekeeper asks questions about which drives are deductible. While your business may not be as buzzing, read on for some applicable tips for small business owners.
Q. I'm a budding beekeeper and want to have my ducks in a row. I have a hive on an extended family member's property and I have a regular job. During the summer, I visit this hive once every 7 to 10 days. During the winter, I visit when the weather permits.
Generally, I make this trip as a long side trip on the way home from my main job. Sometimes I also drive to the hive from my home. Are these trips to my hive deductible?
- Marc F.
A. Driving from the office for your main job to your hive is deductible. This is travel from one business location to another. yet, things are more complicated when travel to or from your home is involved.
If you have a tax-deductible home office that you use for your beekeeping activity, driving to and from home to your hive is deductible. If you don't have a home office, this driving is considered personal commuting by the IRS.
To have tax-deductible home office, you must have a place in your home that you use exclusively and regularly for your beekeeping activity. You don't have to keep bees at home, you can use the home office for administrative or other business purposes like sales or marketing work.
Also, keep in mind that your mileage and other beekeeping expenses will be fully deductible only if your activity qualifies as a business. The IRS will presume it is a business if you earn a profit any three out of five years. But, if you keep incurring losses, the IRS might claim the activity is a hobby. In this event, you'll only be able to deduct your beekeeping expenses from your beekeeping income, if any.
Moreover, such expenses are deductible only as a miscellaneous itemized deduction and only to the extent they exceed 2 percent of your adjusted gross income. You don't need to earn a profit every year to have a business, but if you incur losses you should take steps to show the IRS you're serious about making money. Having a business plan and keeping good records is a good way to do this.