Boomers Retiring to “Fun†Businesses: Is birdwatching a business?
Posted by: in Your Business
I guess I think it’s pretty cool that someone can retire and have a little “fun” business, like the ones described in a current NYTimes article. One guy took some photos of birds and got paid a tiny money. Another makes and sells mobiles, and third is a freelance writer.
served by picapp.com
Maybe I’m a little jealous, but these guys are obviously not worried about money. Must be nice. I’m also wondering if they file income taxes as sole proprietors and claim their losses. The “hobby loss” rules of the IRS require a small business to follow certain guidelines to avoid having the tax loss be denied.
Some of the factors the IRS considers:
- Is there an intent to make a profit?
- Does the owner depend on the business income?
- Are the losses beyond the control of the owner, during startup, for example?
- Is the owner taking steps to improve profitability?
- Does the activity make a profit in some years? (The IRS guideline is that the business should make a profit in 3 of the last 5 years).
- Is there an expectation of making a profit in the future?
The IRS also looks at the type of activity of the business. The freelance writer in the example has a better chance of getting his business accepted than does the guy who is taking pics of birds (writing and selling that writing is easier to justify as a real business than birdwatching and photography).
If you’re considering starting a new business when you retire, check with your tax adviser to make sure your business losses will be able to be used to offset other income.
Tags: baby boomers, hobby loss, IRS, retirement, small business
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