On an average day, 95 percent of Americans age 15 and older engage in some sort of leisure activity, according to the American Time Use Survey by the U.S. Bureau of Labor Statistics. Many of these activities are considered hobbies, which can turn into sources of income for millions of fortunate Americans. Those who do earn income from their hobbies must report the income on tax returns. There are, however, special rules and limits for deductions you can claim. The Pennsylvania Institute of Certified Public Accountants recommends the following four tax tips about hobbies from the IRS.
1. Is it a business or a hobby?
A key feature of a business is that you do it to make a profit. You often engage in a hobby for sport or recreation, not to make a profit. Consider these nine factors when determining whether your activity is a hobby or a business:
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