You may wonder why it is important to obtain the business status. If your income is considered earned from a hobby you are limited in the deductions you can take. For instance, you can only deduct hobby expenses that are less than your hobby earnings. Also, the deductions must be listed as part of your itemized deductions which means that to claim them you must itemize. In order to itemize, your total miscellaneous deductions must exceed 2% of your adjusted gross income. Another concern about a hobby is that the income generated is not.
