I have attached a whole lot of
information to help you understand.
If there are expenses
associated with your income, it would not make sense to classify the work as
hobbies. The expenses would only be deductible as itemized deductions
subject to a 2% adjusted gross income floor.
The recordkeeping and tax
reporting is less with a hobby.
I also wanted to clarify a
point for you - if you earned less than $600 your hobbies,
the payer doesn't have to send you a 1099 form, but you still have to
report the earnings.
Discussion -
Hobby or Self-Employment
First, ask yourself if your hobby is a
recreational pursuit or a profit-making endeavor. Earning a living doing something you
love is a natural goal, but you must be clear about your intentions to claim
expenses come tax time.
The IRS defines a hobby as an
activity:
- You do
purely for the love of it, regardless of the cost.
- You
expect no profit in return.
This doesn't mean you're
prohibited from earning any money. For example, if you tinker with cars, it's
okay for a friend to pay you for an occasional oil change.
Generally speaking, your hobby
is a business if:
- Some or
all of your income comes from the hobby. For example, you sell handmade
candy on an e-commerce store, and the earnings account for half of your
annual income.
- Your
hobby experiences profits and losses. For example, you earn significant
profits from Valentine's Day sales, but you've spent too much on a flavor
of Halloween candy that didn't sell.
Additional resources:
4 Tax Tips for Money Making
Hobbies
Side Giggers - Tax Tips for Side Jobs
When the IRS Classifies Your
Business as a Hobby
Tax Tips for Freelancers - Contractors and
Consultants
The Self Employment Tax
