Hello. What would be the income/expense maximum for a personal business

Makeitlast

Is there a dollar amount to determine if you would file on your personal taxes as a hobby? Or, how to determine if the expenses and income would dictate making a business/incorporating and filing taxes separately?

TristinJ

Determining whether your activity is a hobby or a business is crucial for tax purposes. The IRS provides guidelines to help you make this distinction. Here are some key points to consider:

Hobby vs. Business

1. Intent to Make a Profit: If you engage in an activity with the intention of making a profit, it is considered a business. If you do it mainly for pleasure or recreation, it is likely a hobby.
2. Businesslike Manner: Do you carry out the activity in a businesslike manner and maintain complete and accurate books and records? This is a strong indicator of a business.
3. Dependence on Income: Do you depend on income from the activity for your livelihood? If so, it is more likely to be considered a business.
4. Effort to Make a Profit: Do you put in the time and effort to make the activity profitable? This includes changing methods of operation to improve profitability.
5. Profitability: Does the activity make a profit in some years, and if so, how much? Consistent profitability is a sign of a business.
   
   I have included an IRS site for more information on determining whether your income is a hobby or business:
   
   https://www.irs.gov/newsroom/hobby-or-business-heres-what-to-know-about-that-side-hustle

Makeitlast

Thank you for the response, TristinJ. I had just found that article too. Many points to consider.