inquisitive
Recycles dryer sheets
- Joined
- Apr 7, 2008
- Messages
- 223
Have been reading a lot about taxes, and regardless of whether an activity would qualify as a business vs. a hobby, it seems to me that if one is making a profit from the activity (income - expenses), one would want to classify it as a hobby, and if there is a loss, then one would want to classify it as a business?
Eg if one has net income, you don't want it to be a business because then you have an additional roughly 7.65% SE tax, and I can't see how this would be advantageous even with additional business deductions. And if there is a loss then you want it to be a business so you can use the loss against other income.
The only exception I can see to this is that if one makes more than $117,000 in other income (eg W2), then the social security tax is phased out and it would make more sense to have a business in order to use certain business deductions. Is this summary correct? I haven't seen anyone discuss it in this way in any book or article, but it seems like this is the only way to conceptualize it that makes sense.
Eg if one has net income, you don't want it to be a business because then you have an additional roughly 7.65% SE tax, and I can't see how this would be advantageous even with additional business deductions. And if there is a loss then you want it to be a business so you can use the loss against other income.
The only exception I can see to this is that if one makes more than $117,000 in other income (eg W2), then the social security tax is phased out and it would make more sense to have a business in order to use certain business deductions. Is this summary correct? I haven't seen anyone discuss it in this way in any book or article, but it seems like this is the only way to conceptualize it that makes sense.