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Is it a hobby or a business? Here's why that matters for your taxes.
Is it a hobby or a business? And can you write off a business that loses money every year? Starting in 2026, the answer got a lot more attention thanks to the OBBBA. The One Big Beautiful Bill Act has now permanently eliminated the old deduction rules for “hobby” expenses. Meaning, if the IRS decides your “business” is actually a hobby, (they use a nine factor test to determine this) you likely still owe taxes on the income but the IRS might come after every deduction you try to claim. That’s a big deal for side ventures, passion projects, farms, horse activities, content creation businesses, Airbnb activities, and other ventures that run losses year after year. So if you've been running a side venture at a loss and calling it a business, ask yourself a couple questions. Is there a real profit motive here or is this mostly to fuel your passion? Are you running it like a business, separate accounts, actual records, a plan to get profitable? And is your core financial foundation solid enough to absorb the losses if the IRS comes back with an opinion and this starts costing you more money than you planned? That doesn’t mean you have to stop doing what you love. But once you call it a hobby instead of a business, the costs of the “business” and the whole financial plan gets a lot cleaner. As always, be sure to talk with an advisor or CPA to what this means with your individual situation. #OBBBA #TaxStrategy #HobbyVsBusiness #SmallBusiness #CFP #WealthManagement #BusinessOwners #FinancialPlanning
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