Commentary, news and
reflections about
this taxing life, by Vernon Jacobs, CPA.
this taxing life, by Vernon Jacobs, CPA.
Jacobs is the co-author of Legal Ways to Save Taxes Offshore & Onshore, of Offshore Tax Strategies, of The Controlled Foreign Corporation Tax Guide and of Risk Management for Amateur Investors. He is the Editor & Publisher of the International Wealth Protection Monitor newsletter and the free Q&A service, the Jacobs Report on International Financial Planning. He is the President of Offshore Press, Inc. and is a member of the International Tax Technical Resource Panel of the American Institute of CPAs. He has been a CPA since 1962, with a focus on taxes since 1975. .
The Beneficial Hobby Loss Rule
Many folks seem to think that the so-called "hobby loss rule" means they must make a profit in two of every five years in order to deduct the expenses relating to income from a home business.
If you have a hobby that generates some income sometimes, but is more likely to produce a loss, then the statement is true. Hobbies include activities that may generate some modest income such as painting, crafts, raising animals, etc. If you are engaged in an activity for personal (non-business) reasons, it's a hobby. The income is taxable and the losses are not deductible unless you can make a modest profit in any three of any five year period.
But, note that many hobbies can become a business by making (and documenting) an effort to make a profit. It's your intention that makes the difference.
If you have a real business that you are operating in order to make a profit, you can deduct a loss every year for 20 or more years. If your business takes many years to generate some profit, you may have to argue your position in the Tax Court, but others have paved the way for you
by Vernon Jacobs, CPA
Co-author of Legal Ways to Save Taxes Offshore & Onshore
http://www.offshorepress.com/legalways2save.htm
| Contact Information: Email jacobs1@kc.rr.com. Phone
913-362-9667, Fax 913-432-7174, U.S. mail to POB 8194, Prairie Village,
Kansas, 66208. www.vernonjacobs.com |
Jacobs is the co-author of Legal Ways to Save Taxes Offshore & Onshore, with J. Richard Duke, JD, LLM.
