Tax Tip 2022-57: Here’s how to tell the difference between a hobby and a business for tax purposes
Internal Revenue Service (IRS) sent this bulletin at 04/13/2022 09:57 AM EDT
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Issue Number: Tax Tip 2022-57Here’s how to tell the difference between a hobby and a business for tax purposes A hobby is any activity that a person pursues because they enjoy it and with no intention of making a profit. People operate a business with the intention of making a profit. Many people engage in hobby activities that turn into a source of income. However, determining if that hobby has grown into a business can be confusing. To help simplify things, the IRS has established factors taxpayers must consider when determining whether their activity is a business or hobby. These factors are whether:
All factors, facts, and circumstances with respect to the activity must be considered. No one factor is more important than another. If a taxpayer receives income from an activity that is carried on with no intention of making a profit, they must report the income they receive on Schedule 1, Form 1040, line 8.
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