What is the "hobby rule"?

What is the "hobby rule"?

Gregg Wind (Partner, Wind Bermer Hockenberg, LLP) gives expert video advice on: Can starting a business decrease my taxes? and more...

The hobby loss rule generally applies when you have a consecutive number of years when you report losses, generally on a Schedule C sole proprietorship arrangement. While the rules exist, they're not absolute. If you can show that you do have a profit motive, you can go a long way toward preserving business deductions that would otherwise be disallowed if you were deemed to have a hobby and not a business. The things that can promote that profit motive are whether you have business cards and letterhead, and whether you're advertising, and whether you're meeting with people that can bring profit to the business.