Originally Posted by Mama2Bella:
Question probably geared toward Tom- if I were to reduce my families to my one PT family and only made about $400 a month, what would be the tax implications? I know if you don't show profit after 3 years it's considered a "hobby" but what exactly does that change?
If you make less money, your taxes will be less and you will have less money in your pocket at the end of the year. You may not be able to claim all of your house deductions since they can't create or increase your profit. You can roll over these house deductions to the next year, but you may never be able to claim them.
If your Schedule C expenses (without counting your house expenses) consistently exceed your income, you could be showing a loss for many years. This may attract the attention of the IRS who may decide that you aren't trying to make a profit and they can reduce your expenses until you do show a profit.
I would not advise showing a loss more than twice every 5 years.