Earning money from your hobby?
Here’s a bookkeeping fact you may not know: if you earn income from your hobbies, you must report those earnings to the IRS.Reporting hobby income differs from reporting business income. If you’re not sure whether your activity classifies as business or hobby, the IRS offers 9 factors to help you determine.Once you identify the project as a hobby, you can deduct ordinary and necessary expenses, similar to a business. Unlike a business, though, you can only deduct hobby expenses up to the amount you earn as income.Expenses may fall into three types and must be itemized on your return to take the deduction. Publication 535, Business Expenses (also applies to hobbies), provides guidelines on what you can deduct and how to deduct expenses.Additional resources available from the IRS for taxpayers who report hobby income include:
- Business or Hobby? Implications on Deductions
- Publication 525, Taxable and Nontaxable Income
- Publication 529, Miscellaneous Deductions
- Publication 17, Your Federal Income Tax
- IRC Section 183: Activities Not Engaged in For Profit – details on the factors to determine ‘for profit’ or ‘not-for-profit’
If all this information begins taking the fun out of your hobby, the experienced tax preparation team at Patrick & Robinson CPAs can help eliminate worry for you. Contact us at Office@CPAsite.com or 904-396-5400.
