Taxpayers can generally deduct ordinary and necessary expenses for conducting a trade or business or for the production of income.
But taxpayers who operate a hobby hoping to earn some income from it are faced with daunting rules regarding the taxation of the activity: If the activity is not engaged in for profit, it doesn’t qualify as a trade or business, and therefore any income received is reportable as “other income” on Form 1040, while losses are considered nondeductible personal expenses. Expenses are deductible, but only to the extent that the activity generates income, and the deduction is limited by the 2 percent adjusted gross income floor for miscellaneous itemized deductions.
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access