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What does it mean for the IRS to consider something a hobby?



In thinking about aircraft task planning or purchasing a business aircraft, many aircraft owners have heard wind of or become concerned that their aircraft may be considered a hobby by the IRS, and therefore be non-deductible. The IRS allows you to deduct any ordinary and necessary business expenses. What they may do is try to apply something called the hobby loss rule, or a hobby loss test in order to consider whether or not your aircraft is really for your business or it’s just something that you’re doing for fun or for your own amusement, and not a true business expense. The IRS applies a multi-factor test in trying to determine whether or not the aircraft is a hobby. They’re often subject to these rules or limitations, or at least the taking of the test, because they’re owned and single-purpose entities that don’t generate a profit within the activity. It’s important when the IRS brings up the word hobby that you closely show the relationship that aircraft has to your primary income-generating activities.

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