Auerbach Law Group, P.C.
White Plains
914-686-7171
Chappaqua
914-238-7171
East Hampton
631-329-7171
Call us

Contact our offices

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

The business versus hobby distinction

Many people in White Plains and the other communities around New York City have hobbies. In most cases, people probably think of a hobby as something that a person spends money on in order to get a non-financial benefit, like relaxation or personal satisfaction.

There are, however, many hobbies in which a New Yorker can also make a little extra cash. By way of example, someone who likes to sew may do a few projects for others and make some money for their work.

Like all other forms of income, this extra cash is reportable to the IRS and will get included when calculating a person's federal income tax obligation. The nice thing about hobbies is that, just as a person must include any income they make, they are also able to deduct expenses associated with their hobby. For example, someone who sews a dress and collects $100 can deduct the cost of fabric and supplies.

The catch is that, unlike full-blown business income, or expenses, a taxpayer cannot claim an operating loss on his or her hobby and thus reduce his or her other income.

The reason is that, to the IRS's thinking, hobbies are not meant to produce income and thus should not be used to claim losses which the taxpayer in all likelihood fully expected.

Whether a business is truly a business or a hobby can lead to tax controversies. Perhaps because it is concerned that unscrupulous taxpayers will use their hobby as a sort of tax shelter, the IRS will ask several questions about a person's business activities in order to determine whether there really is an intention to make a profit as opposed to engage in a hobby.

Someone whose business activities are getting scrutinized in this respect should strongly consider consulting with an experienced tax attorney.

No Comments

Leave a comment
Comment Information

Contact us

White Plains Office
81 Main Street
Suite 307
White Plains, New York 10601

Phone: 914-686-7171
Fax: 914-686-0168
White Plains Law Office Map

East Hampton Office
17 Beverly Road
Post Office Box 2888
East Hampton, New York 11937

Phone: 631-329-7171
Fax: 631-604-6140
East Hampton Law Office Map

Chappaqua Office
726 King Street
Post Office Box 488
Chappaqua, New York 10514

Phone: 914-238-7171
Fax: 914-238-4353
Chappaqua Law Office Map

map-bg map-bg