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Sow tax-reducing seeds for your blossoming sideline business

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in Small Business Tax

Maybe it’s your dream to give up your white-collar job to run a farm or raise horses in the country. You’re not alone: Many professionals living in the city are drawn by the lure of the “simple life.” But it’s not so simple from a tax

Strategy: Turn your dream into reality, but prepare to prove that you intend to turn a profit from the activity.

Why? Because if you’re not careful,the “hobby loss” rules can trip you. In effect, you won’t be able to deduct the expenses exceeding the income from the activity.

Here’s the whole story: So long as you’re running a legit business, you can generally deduct all of your ordinary and necessary expenses, even if you show a loss for the year. In fact, this is pretty common in the early years of ownership. But deductions are limited if the IRS considers the activity to be a hobby rather than a business.

You can deduct the expenses attributable to a hobby only up to the amount of t...(register to read more)

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