In the eyes of the Internal Revenue Service (IRS) there is a significant difference a hobby and a business. Expenses for a business can be deducted. Expenses from a hobby cannot be deducted.
Businesses have a profit motive. Hobbyists are simply pursuing a pleasurable activity, whether or not they receive any profit from it. (Income from both businesses and hobbies must be reported.)
According to current IRS rules, if your business made a profit for three out of the last five years (or two out of the last seven years for breeding, showing, training, or racing horses) then it is generally considered a business for tax purposes.
In a nutshell, this means that if, over the course of several years, your business consistently costs more to operate that you take in, your business might be considered a hobby.
For additional information, refer to the IRS website. Always consult your own tax accountant for specific questions or issues related to taxation.
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Man, I guess that makes my work just a hobby then. Or does it not really count until you've been at it for more than a year?
Posted by: Brook | August 31, 2007 10:43 AM | Permalink to Comment