{"id":1303,"date":"2026-03-27T20:05:30","date_gmt":"2026-03-27T20:05:30","guid":{"rendered":"https:\/\/belbolcpa.com\/blog\/?p=1303"},"modified":"2026-03-27T20:07:37","modified_gmt":"2026-03-27T20:07:37","slug":"does-the-irs-think-your-business-is-a-hobby","status":"publish","type":"post","link":"https:\/\/belbolcpa.com\/blog\/does-the-irs-think-your-business-is-a-hobby\/","title":{"rendered":"Does the IRS Think Your Business is a Hobby?"},"content":{"rendered":"\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"796\" height=\"438\" src=\"https:\/\/belbolcpa.com\/blog\/wp-content\/uploads\/2026\/03\/03-27-2026-iStock-1968163891.jpg\" alt=\"\" class=\"wp-image-1304\" srcset=\"https:\/\/belbolcpa.com\/blog\/wp-content\/uploads\/2026\/03\/03-27-2026-iStock-1968163891.jpg 796w, https:\/\/belbolcpa.com\/blog\/wp-content\/uploads\/2026\/03\/03-27-2026-iStock-1968163891-300x165.jpg 300w, https:\/\/belbolcpa.com\/blog\/wp-content\/uploads\/2026\/03\/03-27-2026-iStock-1968163891-768x423.jpg 768w\" sizes=\"auto, (max-width: 796px) 100vw, 796px\" \/><\/figure>\n\n\n\n<p>Are you sure your business isn\u2019t considered a hobby in the eyes of the IRS? If so, then your expenses are very limited or disallowed. Here are some factors to help determine if you operate a business or hobby.<\/p>\n\n\n\n<p><strong>Factors According to the IRS<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The taxpayer carries out activity in a businesslike manner and maintains complete and accurate books and records.<\/li>\n\n\n\n<li>The taxpayer puts time and effort into the activity to show they intend to make it profitable.<\/li>\n\n\n\n<li>The taxpayer depends on income from the activity for their livelihood.<\/li>\n\n\n\n<li>The taxpayer has personal motives for carrying out the activity such as general enjoyment or relaxation.<\/li>\n\n\n\n<li>The taxpayer has enough income from other sources to fund the activity<\/li>\n\n\n\n<li>Losses are due to circumstances beyond the taxpayer&#8217;s control or are normal for the startup phase of their type of business.<\/li>\n\n\n\n<li>There is a change to methods of operation to improve profitability.<\/li>\n\n\n\n<li>Taxpayer and their advisor have the knowledge needed to carry out the activity as a successful business.<\/li>\n\n\n\n<li>The taxpayer was successful in making a profit in similar activities in the past.<\/li>\n\n\n\n<li>Activity makes a profit in some years and how much profit it makes.<\/li>\n\n\n\n<li>The taxpayer can expect to make a future profit from the appreciation of the assets used in the activity.<\/li>\n<\/ul>\n\n\n\n<p><strong>Safe Harbor According to the Code<\/strong><\/p>\n\n\n\n<p>There is a safe harbor rule stating if you have income from an activity for 3 or more years out of 5 then the activity is considered to be engaged in for profit.<\/p>\n\n\n\n<p><strong>Expenses not Deductible<\/strong><\/p>\n\n\n\n<p>The main reason you do not want an activity to be considered a hobby is because you cannot deduct any expenses, except for those directly tied to producing the product, such as materials and inventory.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Are you sure your business isn\u2019t considered a hobby in the eyes of the IRS? If so, then your expenses are very limited or disallowed. Here are some factors to help determine if you operate a business or hobby. Factors According to the IRS Safe Harbor According to the Code There is a safe harbor [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[287,2,3,208,247,7,8,10,285,12,15,18],"tags":[],"class_list":{"0":"post-1303","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-accounting","7":"category-budgeting","8":"category-business","9":"category-economy","10":"category-employees","11":"category-expenses","12":"category-financial","13":"category-investments","14":"category-irs","15":"category-irs-resolution","16":"category-new-jersey-tax","17":"category-taxes","18":"entry"},"_links":{"self":[{"href":"https:\/\/belbolcpa.com\/blog\/wp-json\/wp\/v2\/posts\/1303","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/belbolcpa.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/belbolcpa.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/belbolcpa.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/belbolcpa.com\/blog\/wp-json\/wp\/v2\/comments?post=1303"}],"version-history":[{"count":1,"href":"https:\/\/belbolcpa.com\/blog\/wp-json\/wp\/v2\/posts\/1303\/revisions"}],"predecessor-version":[{"id":1305,"href":"https:\/\/belbolcpa.com\/blog\/wp-json\/wp\/v2\/posts\/1303\/revisions\/1305"}],"wp:attachment":[{"href":"https:\/\/belbolcpa.com\/blog\/wp-json\/wp\/v2\/media?parent=1303"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/belbolcpa.com\/blog\/wp-json\/wp\/v2\/categories?post=1303"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/belbolcpa.com\/blog\/wp-json\/wp\/v2\/tags?post=1303"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}