When does your hobby become a business? If you’re just getting started selling a few things online, it almost always starts as a hobby. That’s especially true if you’re just selling things out of your garage or storage.
But, at some point you’ve got to wonder if you have a business. This all leads up to a question that we received at USTaxAid.com. If you’ve got a question, please submit it through the website. You’ll see the box for questions on the right hand side.
Here’s the question we received: “How much money do you have to earn for income from hobby is considered a business?”
Before I answer the question, I want to get on a bit of a soap box. I’m a huge fan of businesses. It can be a small business, side business, home-based business or part-time business. Once you have a legitimate business, you can take deductions for things like a home office, computer, cell phone, travel and the like. Of course, you have to have a business purpose for the expense and you need to keep receipts and accounting records. But, do those things and you’ve got a great tax break.
For that reason, I would encourage you to take a look at calling this a business as soon as possible.
But maybe you don’t want to deal with that hassle, and what you really want to do is avoid having to file a business return as soon as possible. In that case, the question might be how long can you avoid filing? The answer is “maybe forever.” It’s not a question of how many sales, or how much money you make in sales or even how long you’re operating. The question is whether you are operating like a business. If all you’re doing is selling items you already own, you don’t have a business. But once you start buying things specifically to sell, you have a business.
If you’ve got more tax or accounting questions, we’d love to get them!