Hobby or Business?

In responding to a comment from the previous post, I thought the information about whether something was business or hobby was important enough to highlight on its own.  The IRS does distinguish between a “hobby” vs.  a “business”.  If you aren’t sure where to start to figure out which is a fit for you, then this page over at the IRS website might be a good place to start, particularly the questions from the site which I am pasting below:

• Does the time and effort put into the activity indicate an intention to make a profit?
• Does the taxpayer depend on income from the activity?
• If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?
• Has the taxpayer changed methods of operation to improve profitability?
• Does the taxpayer or his/her advisors have the knowledge needed to carry on the activity as a successful business?
• Has the taxpayer made a profit in similar activities in the past?
• Does the activity make a profit in some years?
• Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?