When does a Hobby become a Business?

Many people enjoy hobbies and even earn money as a result. That income is reportable and business related to the income may be deductible so long as the activity is not truly a hobby. The way the activity is treated is important in determining whether the government will recognize the activity as a business. The IRS will analyze whether the activity is conducted in a businesslike manner, whether the taxpayer intends to make a profit, the amount of profit, current employment, efforts to increase profit and the causes of losses, along with other criteria.

If the activity is deemed to be a hobby, then the related losses are limited. For more information visit the IRS' website.

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