Hobby or for Profit?

The IRS has developed Fact Sheet 2008-23 that helps explain when an activity is a hobby or a for profit business. Section 183 limits deductions that can be claimed when an activity is not engaged in for profit. Taxpayers may need a clearer understanding of what constitutes an activity engaged in for profit and the tax implications of incorrectly treating hobby activities as activities engaged in for profit. This educational fact sheet provides information for determining if an activity qualifies as an activity engaged in for profit and what limitations apply if the activity was not engaged in for profit.