Wouldn’t it be great if you could deduct all the expenses for your hobby?
Well, unfortunately, you can only deduct losses on a hobby to the extent of your hobby income. But what happens if you decide to create a corporation for your hobby?
I have bad news. Operating the hobby activity within a corporation does NOT change your small business tax result.
Recently, a federal appellate court said that the net losses are not deductible. But, what’s even worse is that the owner of the corporation had dividend income based on the costs that the corporation incurred for the activity.
Make sure you understand the rules before you decide to deduct the expenses of your hobby.
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Copyright 2014 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire, with more than twenty- five years experience on Federal and New Hampshire issues affecting small business, and specializes in keeping his clients OnTrack with bookkeeping, tax, and payroll services for a fixed monthly fee. Learn more about Steve’s exclusive SIX Step system developed for small businesses at www.appletreebusiness.com/map.