Is Your Hobby a For-Profit Endeavor?

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.”