Hobby or Business? Why It
Matters.
Millions
of Americans have hobbies such as sewing, woodworking, fishing, gardening,
stamp and coin collecting, but when that hobby starts to turn a profit, it
might just be considered a business by the IRS.
Definition of a Hobby vs a Business
The IRS
defines a hobby as an activity that is not pursued for profit. A business, on
the other hand, is an activity that is carried out with the reasonable
expectation of earning a profit.
The tax
considerations are different for each activity so it's important for taxpayers
to determine whether an activity is engaged in for profit as a business or is
just a hobby for personal enjoyment.
Of course,
you must report and pay tax on income from almost all sources, including
hobbies. But when it comes to deductions such as expenses and losses, the two
activities differ in their tax implications.
Is Your Hobby Actually a Business?
Could you please provide a direct link to this article. I'd like to read more. Thanks.
ReplyDelete