Hobby Loss

DEFINITION of 'Hobby Loss'



The "hobby loss rule" states that if an activity is profitable in three years out of five then it can be treated as a business in the one or two year(s) that a loss was realized.

For example, if a man builds and sells birdhouses as a hobby, but only makes a profit one year out of the last five, then the losses are considered a hobby loss. The law does not prohibit taxpayers from making deductions on such activities if they are prepared to argue that the losses were created while attempting to make profit.

  1. Profit Motive

  2. Scripophily

    The hobby of collecting antique bonds, stocks and other financial ...
  3. Hazardous Activity

    If one of your hobbies falls under an insurance company’s definition ...
  4. Short-Term Loss

    A capital loss realized on the sale or exchange of a capital ...
  5. Casualty And Theft Losses

  6. Ordinary Loss

    Any loss incurred by a taxpayer that is not considered a capital ...
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