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Hobby vs. Business: A Tax Perspective

When determining whether your activity is a hobby or a business, it significantly affects your tax obligations. Under the IRS hobby loss rules, if an activity is deemed a hobby and not conducted for profit, the income must still be reported. Specifically, such income is documented on line 8j, "Activity Not Engaged in For-Profit Income," on Schedule 1 of the 2025 Draft Form 1040. However, you cannot deduct expenses against hobby income, which can be a crucial consideration when planning financially. Since hobbies aren't for profit, self-employment tax isn't a concern, simplifying the taxation process.Image 1

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