Hobbies! (Yes, they are useful!)

Having hobbies can bring quite a lot of benefits to the table. According to The Washington Post hobbies can not only reduce stress, lower depression and dementia, but also help physically by keeping their blood pressure down and help manage anger and built up anxiety.

So, what if your hobby can also bring in a possible income? At first, it may sound crazy for why else would you want to claim income on your hobby? Well one, the IRS wants your too and second, it does have the benefits of increasing your income allowing you to qualify for higher loans (such as a higher mortgage) allowing you to qualify for a better home. As well, you may deduct the money produced from the hobby towards your tax returns up to the amount of the income. In other words losses from your hobby will not be deducted.

However, the IRS has released a list of the 9 features of what categorizes a hobby. They are;

1. Whether you carry on the activity in a businesslike manner and maintain complete and accurate books and records.

2. Whether the time and effort you put into the activity indicate you intend to make it profitable.

3. Whether you depend on income from the activity for your livelihood.

4. Whether your losses are due to circumstances beyond your control (or are normal in the startup phase of your type of business).

5. Whether you change your methods of operation in an attempt to improve profitability.

6. Whether you or your advisers have the knowledge needed to carry on the activity as a successful business.

7. Whether you were successful in making a profit in similar activities in the past.

8. Whether the activity makes a profit in some years and how much profit it makes.

9. Whether you can expect to make a future profit from the appreciation of the assets used in the activity.

In other words, you keep a very organized list of recipes for supplies, labor, and tools used to sell or market your hobby. It becomes a 'job' if you go out of your way to nurse the hobby and begin to look forward towards the profits of what a business should bring.

****Disclaimer: All information is found in www.irs.gov*****

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References:

https://www.washingtonpost.com/business/capitalbusiness/career-coach-the-value-of-hobbies/2013/05/03/ffa53f2c-b294-11e2-bbf2-a6f9e9d79e19_story.html?noredirect=on&utm_term=.064078d331e5