{"id":6967,"date":"2023-05-22T10:03:00","date_gmt":"2023-05-22T16:03:00","guid":{"rendered":"https:\/\/www.blockadvisors.com\/resource-center\/?p=6967"},"modified":"2024-04-19T08:45:06","modified_gmt":"2024-04-19T14:45:06","slug":"small-business-taxes","status":"publish","type":"post","link":"https:\/\/www.blockadvisors.com\/resource-center\/build-your-business\/small-business-taxes\/","title":{"rendered":"Turning a hobby into a small business | Part 4 \u2013 Tax perks"},"content":{"rendered":"
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To celebrate Small Business Month, Jamil Khan, Chief Strategy and Small Business Officer at H&R Block<\/a>, shares a five-part series that guides future entrepreneurs on what they need to know when transforming their hobby into a small business. Just joining the discussion? Don\u2019t miss the other articles in this series from Jamil<\/a>.<\/p>\n\n\n\n

Block Advisors by H&R Block is honored to support Small Business Owners all year round. Our friendly experts provide affordable tax, bookkeeping, payroll, and business formation<\/a> expertise and tools year-round, backed up by our Block Advisors guarantees<\/a>.<\/p>\n\n\n\n

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Understand the perks and limitations of small business taxes<\/h2>\n\n\n\n

Shifting from hobby to business has a few upsides I want to share with you \u2013 one of the largest being the valuable ability to deduct business expenses and losses. The IRS allows small businesses to offset their business income by deducting \u201cordinary and necessary expenses.\u201d Furthermore, if you have a tough year and find yourself with a loss rather than a profit, that loss can be deducted from your current year\u2019s non-business income, or against income in future years.<\/p>\n\n\n\n

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File your self-employed taxes your way, year round.<\/h3>

Let us handle your small business taxes.<\/p>

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Work with a tax pro in person or from home<\/a><\/div>\n<\/div><\/div><\/div>\n\n\n\n

NOTE: These perks come with a strong caution from my friends at <\/em>The Tax Institute<\/em><\/a> \u2013 if you find yourself reporting high expenses and losses for several years, the IRS may start to question if you truly <\/em>have a business or if it is a hobby<\/em><\/a>. Thankfully, there are ways to safeguard your small business\u2019 status and ensure you don\u2019t accidentally regress into hobby classification.<\/em><\/p>\n\n\n\n

First \u2013 a little background. Many small business owners use Schedule C when filing their taxes. This document details your company\u2019s profits, losses, and deductions. There are many deductions that are available to small business owners that hobbyists simply don\u2019t have access to. When you\u2019re a small business, a few of the things you can deduct include:<\/p>\n\n\n\n