Hobby Losses

Can you deduct the losses from a hobby? The  answer is no. Hobby is a bad word to the IRS, and if you are engaged in a hobby you are not intending to make a profit according to the IRS. If you can, you want to become a business where you can deduct the losses. To do so you have to show you intend to make a profit. This profit making intent is a facts and circumstances test that is determined by factors such as how professional are you in carrying out the activity. Do you keep good books and records? Did you get any required business licenses? Do you keep a separate checking account and credit card just for the business? How much time and effort goes into the business? The one that comes up a lot in litigation is whether the activity has elements of personal pleasure or fun.  The more fun it is the more the IRS will say it is a hobby. Hobby losses can be deducted to the extent of hobby income and disallowed hobby losses can't be carried forward.