Fix The Tax Code Friday: Hobby Loss Rules
I’m in Chicago today for the BlogHer Conference, where I will be speaking about blogging and tax. One topic that I plan to focus on is the issue of hobby versus business, which I addressed earlier in an “Ask the Taxgirl” segment and in my Problogger guest post. Briefly, the IRS allows you more favorable tax treatment when you are running a business (for profit) as compared to when you are entertaining your hobby (for fun). So today’s Fix the Tax Code Friday question is:
Should there be a distinction between tax rules for income earned from a business versus a hobby?
Yes, there should be a distinction in that hobby losses should not be deductible in full without limitation. I’d apply the PAL rules to hobby losses, so that the benefit isn’t necessarily lost, but that deductions in excess of income are suspended until income is sufficient for them to be used.