Small Business Loses Money

[Rebricky]

I technically have a small business in that I am an artist. I make art but don't sell anything. I have expenses like studio space, a website, and materials. I have done the schedule C for some years but stopped since there is a rule about how long you can claim a business that loses money. I haven't claimed it in a few years. Is the max # of years you can claim a "failing" business cumulative or consecutive? Should I start claiming it again to get a bigger tax break?

[DianeW777]

No, you should not claim it just to get a tax break.  It's important to show that you are trying to establish this business for an additional part to your livelihood. You can decide if it is a hobby or a business.  This IRS link will help you: Business or Hobby?

Key elements:

1. A hobby requires you to report the income you received and under the current tax law, Tax Cuts and Jobs Act (TCJA), no expenses are allowed to be used to reduce the money collected even if you itemize deductions.
2. A business allows you to deduct the costs necessary to obtain the income.  The law explains that 'you must be engaged in the activity to produce a profit'.  The test under IRS tax law is that you must show a profit three out of every five consecutive years to be considered a business.

@Rebricky