With the holidays having passed, we would like to bring up the topic of hobbies and businesses. Do you have a passion for something which you are particularly talented at? Perhaps you made candles or other homemade gifts for your loved ones during the holidays. Have you ever sold or given away any of the items you’ve created? If so, your passion could potentially develop into a business venture.
Recently, we sponsored a birding festival. Festival attendees – mostly birdwatchers – would stop by our booth, and we would ask them “Do you photograph the birds?” and “Do you sell your photographs?” If they answered “Yes” to these two questions, the next question was “Have you ever considered turning your passion into a business?” The reason we asked these three questions is because, if they were to turn their passion into a business, they can deduct expenses and even equipment, such as cameras and lenses. This doesn’t necessarily mean they need to incorporate, however (see our article on incorporating here.) They could simply set up their business as a Sole Proprietorship (which is relatively inexpensive to do, and we can help with that), and in doing so, make their passion more affordable, especially for those that require expensive equipment.
A point of clarification: “Hobby” is a bad word to the IRS. The difference between a hobby and a business is that a business has a profit motive. If the IRS decides that your business is really a hobby, they can take all sorts of punitive measures. Our CPAs can help you determine whether your passion is really a business or a hobby before the IRS decides for you. Call our office today at (813) 514-8273 to schedule an appointment.