Do you have an activity that you do on the side that you think of as a business? Are you claiming losses on your personal tax return (Schedule C, Form 1040)? Will the IRS allow those losses?
I have had a few questions lately about what the IRS considers to be a hobby and what it considers to be a business. If a business, losses are deductible. If a hobby, you can only deduct expenses up to your revenue and therefore are unable to deduct a loss.
The IRS likes to claim that money-losing sideline activities are hobbies rather than businesses. The federal income tax rules for hobbies have been anti-taxpayer for years, and an unfavorable change enacted in the Tax Cuts and Jobs Act (TCJA) made things even worse for 2018-2025.
If you have such an activity, I should have your attention.
Here’s the deal: if you can show a profit motive for your now-money-losing sideline activity, you can classify that activity as a business for tax purposes and deduct the losses. If you can't, you don't get to deduct the losses.
Factors that can prove (or disprove) such for-profit intent include:
If you have a loss-producing activity that you consider a business but the IRS might consider a hobby, it would be wise to firm up your supporting factors to make sure that it looks and smells more like a business than a hobby.
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