Wondering how the new tax laws will impact your handmade business in 2018? I’ve been wondering too and now that my taxes for 2017 are done and there is better information available, I’ve been doing some research. Here’s what I’ve found so far.
First off, let me make it perfectly clear and remind you that I am NOT a CPA nor have I read all 185 pages of the Tax Cuts and Jobs Act that became public on December 22, 2017. That stuff gives me a headache too!
What I have done is wait until a lot of the dust, commotion, uproar and speculation has settled somewhat and kept an eye out for information from reputable resources from various tax related newsletters that I subscribe to for my “day job” that provided information that didn’t require a legal degree to understand.
So, the first question that most of you provably have is:
Did the new tax bill have any impact on home-based (handmade) business?
That answer is a resounding YES! But it really depends on how you have structured your handmade business AND IF you are treating your handmade business as a real “business” or a “hobby”.
Grab a copy of your current 2017 Form 1040 if you aren’t certain about how you are currently treating your handmade business.
So, real businesses (those who file a Schedule C – Profit or Loss From Business) and report their Business Income or Loss on Line 12 of their tax return will see the greatest benefits of the new tax bill. This includes all small businesses who are sole proprietors, LLC’s, S-Corporations or regular Corporations. (More on that next week.)
Those of you who are treating your handmade endeavors as a hobby and reporting hobby income on Line 21 of your tax return are going to be hit the hardest. This is because the new tax law is going to eliminate Miscellaneous Items Deductions (on Schedule A). Meaning that you will be taxed on the full amount of the hobby income – or at least that’s what the information I’ve found so far indicates. Right now this is a pretty gray area and I’m hoping that as the year progresses there will be more information available.
If you would like to read the Tax Cuts and Jobs Act bill for yourself – here is a link to the 185-page document and here is a link to a much larger document (1,097 pages) that went into the making of the Tax Cuts and Jobs Act.
Join me in my closed Facebook Group where we will be discussing this further.
Until next time, Happy Handmade!