DiSabatino CPA Blog

Mike DiSabatino CPA

A blog by Michael DiSabatino CPA with topics on Tax Savings, Business, Management and more...

Turning Your Hobby Into a Business

You’ve loved dogs all your life so you decide tostart a dog breeding and trainingbusiness. Turning your hobby into a business can provide tax benefits if you do it right. But it can create a big tax headache if you do it wrong.

One of the main benefits of turning your hobby into a businessis that you can deduct all your qualified business expenses, even if it results in a loss. However, if you don’t properly transition your hobby into a business in the eyes of the IRS, you could be waving a red flag that reads, “Audit Me!” The agency uses several criteria to distinguish whether an activity is a hobby or a business. Check the chart below to see how your activity measures up.

 

The business-versus-hobby test

Business versus hobby table

Honest assessment

If your dog breeding business (or any other activity) falls under any of the “hobby” categories on the right side of the chart, consider what you can do to meet the businesslike criteria on the left side. The more your activity resembles the left side, the less likely you are to be challenged by the IRS.

On the other hand, if you determine that you’re really engaged in a hobby, there are still some tax benefits to be had. You can treat hobby expenses as a miscellaneous itemized deduction on a tax return, but generally not more than hobby income. They can be used to reduce taxable income if they and other miscellaneous expenses surpass 2 percent of your adjusted gross income.

As always, feel free to pass this Tip along to friends, and reach out if you need help with your personal tax and finance situation.

DiSabatino CPA
Michael DiSabatino
651 Via Alondra Suite 715
Camarillo, CA 93012
Phone: 805-389-7300
ww.sharpcpa.com

This publication provides summary information regarding the subject matter at time of publishing. Please call with any questions on how this information may impact your situation. This material may not be published, rewritten or redistributed without permission, except as noted here. All rights reserved.

Rate this blog entry:
0
Be Sure It's Really the IRS: Constantly changing s...
August 2017 DiSabatino, CPA Newsletter

Related Posts

 

Speed Up Your Success!

Contact Us Today: 1-805-389-7300

© 2006-2017 Michael DiSabatino, CPA. All Rights Reserved.