How long can a business operate at a loss?

Question

I have an online shirt business www.originaletees.com a.k.a koreantupac.com that is operating at a loss for almost two years, how long can I keep doing it and claim my losses before the IRS calls it a hobby.

Answer 1

Usually you should make a profit by the 4th year. If not, then it will be considered a hobby and you will have to pay all back taxex plus interest.

Answer 2

Generally speaking, it's 3 out of 5 years, but if you can prove to the IRS that you've really tried hard to make a go of it, they'll give you more time. Watch your expenses.