Hobby or business?

🤷‍♂️Side-Business or Hobby? Why the IRS Cares — and How to Tell the Difference.

Many people earn extra money through side work — consulting, photography, crafts, tutoring, repairs, online selling, and more. But is it a business or a hobby in the eyes of the IRS?

🧏‍♂️The answer determines whether your expenses are deductible.

Here’s how to think clearly

A business is generally when you…
• intend to make a profit
• put in consistent effort
• keep records or track income/expenses
• market or advertise your services
• change your approach to improve financial results
• depend on the income or treat it seriously

These factors show you’re pursuing the activity to earn money, even if profit fluctuates year by year.

A hobby is generally when you…
• enjoy the activity mainly for personal satisfaction
• don’t track finances or expenses
• have no plan to improve profitability
• don’t depend on the income
• rarely or never market the activity as an income activity

You may still earn money — but hobby expenses are not deductible under current IRS rules.

👉Why this matters

If the IRS views your activity as a hobby:
• income must still be reported
• expenses generally are not deductible

If it’s a business:
• ordinary and necessary expenses may be deductible
• accurate records support your tax position

Bottom line

🧐How you operate matters more than the label.
If you treat it like a business, document like a business, and the intent is profit — the IRS usually will too.

👉If you’d like guidance organizing your activity before filing opens later this month, I’m here to help.

Big care for small businesses and families.