Be very careful using his advise. Most is correct, BUT, it can easily be misread or misunderstood. The info on the expenses is not applicable for a hobby. Plus most tax advantages are lost if you have hobby losses-- not deductible. Plus hobby gains are at your full tax rate, not capital gains rate
Capital gains rate on coins is 28%, In my case HIGHER than my tax rate. And there is a lot left out of that article.
No they are not. But they can be used to offset any gains you may have if they are properly recorded and documented. Correct.
I always thought the taxes were on the net gain, but you couldn't use net loss. Not that I can do either. If you never sell, it's all "loss".
The IRA can be picky about hobby versus business. There are a number of things that you would be smart to do if you want to claim losses or expenses, such as tracking mileage and other travel costs to and from coin shows, keeping a record of how much time you spend daily (weekly) on your business, and so on. There used to be an often-quoted statistic that says you have to make money 2 out of 5 years (or 3 out of 7, or something similar) in order to be classified as a business, and to the best of my knowledge that is not true. But you have to show the effort to make a profit, and you have to show progress in that regard, otherwise the IRS can disallow expenses or losses as "hobby expenses." As someone has already mentioned for a hobby you can deduct losses in any given year up to the amount of gains, so if you have a $3,000 loss and a $1,000 gain you can only deduct $1,000. And the other does not carry forward to a future year either. But I am not a tax accountant, and this is just my understanding of the rules.
Obviously you're joking. As for the 2/5, 3/7 rathbun cited, that actually is law for state tax purposes in Hawaii. If you fail to show revenue in two of the trailing five years, your GE license gets suspended. In Hawaii, you need a GE license for EVERYTHING, since we get taxed on everything. As for the IRS, this is from their website: "The IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year — at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses. If an activity is not for profit, losses from that activity may not be used to offset other income. An activity produces a loss when related expenses exceed income. The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. It does not apply to corporations other than S corporations. Deductions for hobby activities are claimed as itemized deductions on Schedule A (Form 1040). These deductions must be taken in the following order and only to the extent stated in each of three categories: Deductions that a taxpayer may take for personal as well as business activities, such as home mortgage interest and taxes, may be taken in full. Deductions that don’t result in an adjustment to basis, such as advertising, insurance premiums and wages, may be taken next, to the extent gross income for the activity is more than the deductions from the first category. Business deductions that reduce the basis of property, such as depreciation and amortization, are taken last, but only to the extent gross income for the activity is more than the deductions taken in the first two categories." http://www.irs.gov/uac/Business-or-Hobby?-Answer-Has-Implications-for-Deductions
And my comment was only referring to the part of yours where you said losses were not deductible, which I agreed with. I then added what nobody else had mentioned yet that losses could be used to offset gains.
