Many taxpayers have a ‘side business’ in addition to their main source of income from a job or self-employment. In general, taxpayers may deduct ordinary and necessary expenses for conducting a trade or business or for the production of income. However, Internal Revenue Code Section 183 (Activities Not Engaged in for Profit) limits deductions that can be claimed when an activity is not engaged in for profit. IRC 183 is sometimes referred to as the “hobby loss rule.”
Whether you roll the dice, play cards or bet on the ponies, ALL of your winnings are taxable. Review these tips now so that you are not surprised next April 15th.