• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
  • Advertise
  • Submissions
  • About Us
  • Contact Us
  • Mar 7, 2021
  • Startup
    • Creating a Plan
    • Funding a Startup
    • Franchise Center
    • Getting Your Office Ready
    • Making Your Business Official
    • Marketing Your New Business
    • Personal Readiness
  • Run & Grow
    • Customer Service
    • Human Resources
    • Innovation
    • Legal
    • Operations
    • Risk Management
  • Leadership
    • Best Practices
    • Communication
    • Green Initiatives
    • Open Culture
    • Strategic Planning
    • People Skills
  • Sales & Marketing
    • Advertising and Lead Generation
    • Marketing Innovations
    • Marketing Plans
    • Online Marketing
    • Relationships
    • Sales Activities
  • Finance
    • Budgeting and Personal Finance
    • Payments and Collections
    • Tax and Accounting
    • Pricing Strategy
    • Working with Investors
    • Working with Lenders
  • Tech
    • eCommerce
    • Hardware
    • Software
    • Security
    • Tech Reviews
    • Telecom
  • Shop

SmallBizClub

Helping You Succeed

efile4biz banner
Home / Startup / Creating a Plan / Business or Hobby, What is the Difference?
Business or Hobby, What is the Difference?

Business or Hobby, What is the Difference?

477 Views

Jul 13, 2018 By TaxConnections

Maybe you cater for your friends, maybe you make jewelry, maybe you sell your artwork, maybe you have a lemonade stand—regardless of what you do, do you know how the IRS views this? Here are some tips on how to tell if your activity is a business or a hobby and the tax implications of each.

The IRS has a checklist for determining if your activity is a business or hobby. The list is basically intent. Is this for fun or do you intend to make a profit? Do you want to depend on the income? What is the intent of your activity?

For the IRS list that discusses the difference between a business and a hobby click here.

Now that you have figured out if your activity is a business or hobby, how does that affect your taxes? Hobby deductions are only allowed up to the total income. This means if you made $100, but your expenses are $500, you’re only allowed to deduct $100.

There is a catch to deducting hobby expenses, you have to itemize. Itemizing on a Schedule A includes things such as mortgage interest, property taxes, and gifts to charity.

For complete rules on Schedule A deductions click here. All of these deductions have to be over the standard deduction—the automatic deduction you get based off your filing status. It is most beneficial to take whichever is higher, but technically you would not be deducting your hobby expenses if you cannot itemize.

Have questions? Contact Danielle Harris.

Filed Under: Creating a Plan Tagged With: Deductions, Hobbies

Source: TaxConnections

TaxConnections

TaxConnections

TaxConnections Worldwide Directory of Tax Professionals is an authority site of tax advisors from around the world. As the leaders in our market vertical, you can find and interact with tax professionals in corporations, law firms, public accounting firms, tax services firms, government and academia in one click. Through our innovative technology, we maximize the exposure of a tax professional’s expertise and services to the more than one billion people who go online for tax advice each year.

Related Posts

  • 4 Things to Know About the Self-Employment Health Insurance Deduction
  • Here’s What You Need to Know About the Home Office Deduction
  • Don’t Miss Out on These 6 Tax Deductions for Solopreneurs

Primary Sidebar

efile4biz banner

Random

This is How Startups Help the Covid Economy

Nov 12, 2020 By Devon Bartlett

Meeting Franchise Business Requirements

Jan 8, 2014 By Bill Bradley

Small Businesses Can Challenge the Big Boys

Jan 2, 2015 By Kate Supino

Angels and VCs: Don’t Be Greedy Even if You Can

Oct 21, 2015 By Dave Berkus

How to Succeed in a Crowded Market

Oct 29, 2015 By YEC

efile4biz banner

Footer

About Us

Small Biz Club is the premier destination for small business owners and entrepreneurs. To succeed in business, you have to constantly learn about new things, evaluate what you’re doing, and look for ways to improve—that’s what we’re here to help you do.

  • Facebook
  • LinkedIn
  • RSS
  • Twitter

Copyright © 2021 by Tarkenton Institute, Inc. All Rights Reserved | Terms | Privacy