Hobby Income
Do you have a hobby that is your passion and have you turned that into a money making venture? If so, you are not alone! In the past few years, many people have turned their hobbies into self employment. If you have hobby income that you need to report on your tax return and are unsure how to do this, the information on this page should answer these questions for you.
In the past few years, the gig economy has exploded and many folks have turned a hobby that was once just for fun into a business, including candle making, knitting, pottery making, dog sitting, and more. In 2023, the projected gross volume of the gig economy was expected to reach 455.2 billion in the U.S. alone. Find out if you are part of this as self-employed or an independent contractor.
Do I Need to File Income for a Hobby?
If you have income from a hobby, you will first need to determine if you need to report it on your tax return. To answer this, you can use our free FILEucator tool which will give you the answer. Once you have determined that you need to report the income, you will then need to determine if you are self employed. If you are self employed and your hobby is for profit, you will need to report your income and expenses on Schedule C - eFileIT. You will also need pay self-employment taxes on your income.
eFile will help you generate Schedule C and will calculate self-employment taxes. The Tax App will also walk you through adding all your deductions so you pay as little taxes as possible - start free.
Here is how to report your hobby income on your return on eFile.com depending on which type it is:
- Your self-employment hobby income can be added under the Business section since you will be declaring yourself as a self-employed person. You can then proceed through this section to add all income and expenses.
- For income that is not for self employment is reported on Schedule 1, line 8 (usually on Line Z, Other Income) which can be added in the Other Miscellaneous Income form in your eFile.com account.
How to report cash income from your hobby on your tax return? Does my hobby income qualify as taxable? Do I pay taxes on Etsy or eBay sales? Refer to the table below.
Hobby is just for pleasure or fun.
Yes
No
You spent your money on supplies to create a gift for a friend or relative and did not charge them for it.
Yes
No
You accept more than $600 for your product/service using online marketplaces or payment apps.
No
Yes
You made at least $400, whether it be through cash, credit/debit, Venmo or other payment app, or check.
No
Yes
You made a profit by purchasing supplies and creating a product or service provided to others for a price.
No
Yes
You created, built, crafted, or produced a product, such as an original piece of art or collector's item, and sold it on an online platform.
No
Yes
You collected, bought, or traded for a product or piece of equipment which you then sold for a profit.
No
Yes
If your hobby income produces profit, this is taxable income and it will need to be reported on your taxes. If you are still questioning if you need to file hobby income on your taxes, ask yourself these questions:
Hobby Income
and Taxes
- Did you receive 1099-K from a payment app for your hobby product or service? Do you carry out the hobby in a businesslike manner and keep complete and accurate books and records?
- Does the time and effort you put into the hobby show that you want to make a profit? Does the hobby make a profit in some years? If so, how much profit?
- Do you expect to make a future profit from any asset used for the hobby that will increase in value in the future? Do you depend on income from the hobby for your livelihood?
- Are any losses due to circumstances beyond their control or are the losses normal for the startup phase of their type of business? Do they change how you operate your hobby to improve profits?
- Is there anyone else who you work with who knows how to carry on the hobby successfully?
If you answered yes to any of the above questions, you are generally required to file an income tax return showing this income.
You can generally earn up to $400 in hobby income without paying tax. Your hobby income is generally not considered a business if you do not pursue aspects of business, such as advertising, billing, marketing, contracting, etc.
Related: What if I received a 1099-K?
Important: The IRS has delayed the new reporting thresholds for third-party settlement organizations previously set to take effect. As a result of this delay, third-party settlement organizations (TPSOs) will not be required to report 2023 transactions on a Form 1099-K to the IRS or the payee for the lower, $600 threshold amount enacted as part of the American Rescue Plan of 2021. In other words, if you use apps like Venmo or Cash App to receive payment for your business, you can still receive up to $20,000 before you are issued a tax form. The existing 1099-K reporting threshold of $20,000 in payments from over 200 transactions will remain in effect. This delay is intended to facilitate an orderly transition for TPSO tax compliance, plus individual payee compliance with income tax reporting.
Keep up with tax news and updates to see if this $600 threshold is ever passed.
More information:
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