Hobby business

  • 0

Question: When is my hobby considered a business?

Answer: The IRS is suspicious of any business activity that looks like it provides personal enjoyment, such as antiques, photography, horse racing, etc. If you make a profit in any three out of five consecutive years (two out of seven years for horse activities), your activity is presumed to be a business, and any business losses are deductible.

If you fail to show a profit, you may still qualify to deduct your losses if you are running your business with the intent of making a profit. For example, the way you keep records, the amount of time you spend in the business, and your financial risk in connection with the activity are some of the factors the IRS will consider.

Even if your hobby doesn’t qualify as a business, your hobby income must still be reported on your income tax return. If you itemize your deductions, you can write off your hobby expenses up to the amount of your hobby income.



All stories by: speakeasy

Comments are closed.