My wife is an accountant.

"Hobby" implies activities that have costs and don't make money. You cannot write off hobby expenses.

"Business" implies activities that have costs but make money (3 out of every 5 years? Or 4 out of 5? I don't know but my wife said something to that effect). You can write off expenses.

The big thing that distinguishes the two is that you can write off business expenses from a tax point of view. You cannot write off hobby expenses. Since we all know how much money cycling can absorb, we all know that it'd be nice if we could write off cycling. But we can't because, frankly, most of us don't make the $1000 to $5000+ (conservative, I know, but let's play nice) that we spend annually on our hobby. Imagine a car racing fanatic who lays out that amount of money every weekend for fuel, tires, travel, etc.

It has nothing to do with the percentage of income you earn. You can earn $20 year after year on a business, although the IRS will probably check up on you if you claim $100k in expenses for those same years.

I have a full time job (paycheck). I also have a business (technically/legally) of promoting bike races. I make much less money at promoting races but I still have to pay income taxes on the money I earn through promoting races because it's a business.

Now just how much money I make at promoting is a different story. It's possible that I didn't claim all my travel expenses at full IRS value because it's possible that not doing so would drive my business into a hobby.

I have a cycling hobby. I don't write off my bike equipment or other less-than-kosher things like that.

I have a race promotion business. I do write off state fees, hosting fees, equipment I buy for promoting the races, sponsorship costs, advertising, and consumables (stuff like race numbers, pins, salt for melting ice, gasoline for generators, etc).

cdr