Whether you picked up embroidering, dog grooming, or making your jewelry, a side hobby may or may not require paying taxes. Here are some things to consider when determining whether your activity is a hobby or business:
- Is your hobby carried out in a businesslike manner?
- Do you maintain complete and accurate books and records for your hobby?
- Is the effort you put into your hobby intended to make a profit?
- Do you depend on the income from your hobby for your livelihood?
- Do you have the knowledge needed to carry out your hobby as a successful business?
- Have you made a profit from your hobby?
If you receive income from your hobby with no intention of making a profit, you may have to report the income to the IRS.
* This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov7
Footnotes and Sources
- IRS.gov, June 30, 2021
