Not every economic activity that makes money is a bona fide business, at least according to the IRS. There are significant advantages to having a business vs. a money-making hobby, and this video presents the criteria the IRS uses to differentiate genuine businesses from mere money-making hobbies.

CORRECTION/CLARIFICATION: If you have hobby related income, you can reduce your income by the cost of any goods you sell or make. These expenses are claimed as an "other adjustment to income" on line 24z of Schedule 1. These expenses CANNOT be more than the income claimed.

Additional resources and information:

thebalancesmallbusinsness.com: "How the IRA Decides If Your Hobby Is a Real Business": https://www.thebalancesmallbusiness.c...

JDSupra: "Turning a Hobby Into a Business and Into Tax Trouble": (this is a more lighthearted and humorous take on the subject) https://www.jdsupra.com/legalnews/tur...

The Tax Geek on Twitter: @taxgeekusa

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Image and video credits:

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Wikimedia Commons:
Andrew Schalk (CC-SA 4.0)

The image of "Sue" was generated by thispersondoesnotexist.com and any resemblance between her and any person, living or dead, is coincidental and not intended.

Intro Music: "Bluesy Vibes" - Doug Maxwell - YouTube Audio Library

Background and Outro Music: George Street Shuffle, Kevin McLeod, http://incompetech.com via YouTube Audio Library

DISCLAIMER: This video is for educational and informational purposes only. It is not intended to render tax advice or investment advice for individual situations. If you have questions regarding your particular situation, please consult with a qualified tax or investment professional.

The information in this video is current as of date of publication, and is subject to changes enacted by Congress or the IRS.