Is your side hustle a business or a hobby for taxes?

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How to make money from home. How to make passive income. How to make money while you sleep. It's everywhere. Everyone has a side hustle it seems. Are you prepared for the tax ramifications? Is it a business or is it a hobby for tax purposes? Why does it matter? Watch this video for more info.
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*Disclaimer: All information contained in my videos are for general educational purposes only. These videos are not meant to be used as tax advice for any specific individual, business, or other entity. You should consult with a CPA or other professional before making any decision that impacts your tax and financial responsibilities. Additionally, I am not a Certified Financial Planner and I do not give investment advice. Any information contained in my videos related to budgeting, finances, or investments are solely my opinions and are not intended to influence specific decisions you may make as it relates to your finances.

Опубликовано:

16 сен 2020

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Комментарии : 35

@satsuma3293 2 года назад

Loved the content, it's very useful.

@IntentionalFinance101 2 года назад

Thank you for watching and for the feedback!

@JECEA0263 Год назад

Very helpful Thank you

@IntentionalFinance101 Год назад

I'm glad this was helpful. Thank your for watching!

@jst44216 9 месяцев назад

Thank man that really helped. Question: i recently started an llc electrical business this year (2023). Im currently an electrician working for someone trying to gain enough money to be on my own fully along with gaining clients and more work. I recently bought a diesel, enclosed trailer, work box and a rv along with several tools this year using my personal money from my full time job. Can i write all that off even though ive only made under 5000 so far on my business side?

@IntentionalFinance101 9 месяцев назад

Hey Johnny, being able to write off the expenses doesn't have too much to do with how much you've made. The question will be are in business yet, which it sounds like you are since you've taken jobs and made $5,000. The most important for writing off those items is going to be what % of their use is business use verses personal use. If you're using them for you other job (which I assume is W2) that would be personal use. Of course any time you're using them and it's for neither job that would also be personal use. And whenever you're using them for your new electrical business that would be business use.

@tomg221 2 года назад

Great video. I am looking to start an online shop as a hobby. I don't expect to make a lot of profit from it... Maybe a couple hundred dollars... Can I just keep track of any profit I make in my PayPal account and show my tax guy at at the end of the year? - I don't need to register a business or fill out any crazy tax forms, right?

@IntentionalFinance101 2 года назад

Thanks for watching. If the transactions are minimal you won't have a hard time keeping track. If it becomes a pain to go back and figure it out at year end, that's when you need a bookkeeping software. With etsy, you may want to look into sales tax and if you have a sales tax issue if you are responsible or if etsy handles it.

@christalcrawford6542 5 месяцев назад

I put some clothes I had out grown in a friend’s vintage store for 6 weeks when she was starting out. She charged me 25% of sales for space. I purchased things to display, tag, package items. Thrifting is my hobby so I picked up a few things to fill up the space. I didn’t receive an itemized list of my sold items. Do I need to claim this on my taxes?

@IntentionalFinance101 5 месяцев назад

The clothes you out grew sound more like a yard sale to me (items that you purchased a while ago for personal use, are worth less than you paid for them, and are now being sold). However, "thrifting is my hobby" sounds like you also purchase and resale thrift items, in which case that would need to be reported possibly as a hobby or possibly as a business based on the criteria and facts.

@samayoa95 2 года назад

Question. My hobby is wrist watches and pocket knives. I buy and sell many wrist watches and pocket knives as I like I own them for a few weeks before selling them back on eBay. What if eBay sends me a 1099 on the watches I have sold on their platform? Overall, I have lost money on this Hobby. What should I do with the 1099? I don't keep records as this is just a hobby.

@IntentionalFinance101 2 года назад

hobby income is reportable taxable income. the difference between hobby and business will change things like self employment taxes and how much expenses you can deduct against the income, but under all circumstances you should be reporting the income somewhere.

@samayoa95 2 года назад

@@IntentionalFinance101 but as a whole, I have lost money. I sell these items with a lost.

@IntentionalFinance101 2 года назад

@@samayoa95 I understand. Hobby's can't report losses, but the income and deductions (up to the income) are required to be reported. And since you have a 1099 from ebay, the IRS will be looking for it.

@samayoa95 2 года назад

@@IntentionalFinance101 How do I let the IRS know what I paid for the item I sold so they know I'm selling them as a loss? How do I let them know that this is just a hobby?

@IntentionalFinance101 2 года назад

@@samayoa95 probably none. you need to look up hobby loss rules and how to report hobby income. or hire a professional.

@jammytorio Год назад

Hi. I earned like $800 dollars from online surveys and playing games. Does it count as a hobby income? or does it count as a self employed income? I just really see them as a hobby activity and don't do them consistently but I'm asking for your opinion in case you see it differently

@IntentionalFinance101 Год назад

Jammy, thanks for watching. There are several factors and it'd likely take a discussion to give an official opinion. The amount of income isn't necessarily the only factor. Here's some more information as well. www.irs.gov/newsroom/heres-how-to-tell-the-difference-between-a-hobby-and-a-business-for-tax-purposes There's always some interpretation involved, just make sure you have a reasonable basis for determining if it's a hobby or a business.

@siblis20 2 года назад

Generally, a US taxpayer does not have to file a tax return unless their gross income exceeds the standard deduction. If you have no income from other sources, but you have significant income from a 1099-k reported to the IRS, it may require a tax filing.

@IntentionalFinance101 2 года назад

Thanks for watching and for the comments.

@siblis20 2 года назад

@@IntentionalFinance101 welcome

@lifeaccordingtolinda1852 2 года назад

So if I am selling a lot of personal possessions to declutter my house, taking a loss of many of the items I am selling as I bought them for a higher price and am taking a loss; would that be a business or a hobby? I have been selling online for 6 months or so and am not finished yet. Lots of stuff to clear out.

@IntentionalFinance101 2 года назад

sounds more like a yard sale over an extended period of time where you are selling personal items, no profit motive, for less than you bought them for. sounds like nothing to report. neither a business nor a hobby.

@lifeaccordingtolinda1852 2 года назад

@@IntentionalFinance101 But If my sales are over $600 on Mercari or Facebook Marketplace, as I understand, I will be getting a sales report as I need to report on my taxes. How does this work? I am thinking my total sales this year will be around $1,500 for both sites combined

@IntentionalFinance101 2 года назад

@@lifeaccordingtolinda1852 They should not issue a report unless you have a business account. Personal accounts will not receive (should not receive) a 1099. If you do receive one, then there are steps for making sure it's reported correctly and you'll likely need to go to a professional tax preparer.

@marioaltamirno2855 2 года назад

But you have. 200000 and 200 and over to consider a business for online 3 party seller like eBay and Amazon. If. Less that amount it will be considered a hobby because no 1099 k. Under hobby but rules will change to 600 above gross sales will get a 1099 k.

@IntentionalFinance101 2 года назад

Hey Mario, thanks for commenting and watching. I'm not sure I'm following your comment exactly... but receiving a 1099k has no bearing on the determination for tax purposes of whether you have a hobby or a business. The tax code and the factors spelled out in the tax code determine hobby or active trade or business. The 1099k is simply a reporting requirement of the merchant to help the IRS catch you if you don't report all your income. You have to determine hobby or business regardless and you have to report all income (whether hobby or business income) even if you do not receive a 1099 for the income.

@marioaltamirno2855 2 года назад

@@IntentionalFinance101 I thought if you gross less than 20k will be considered a hobby and greater than 20 k. Will be treated a business

@IntentionalFinance101 2 года назад

No, that’s incorrect. You might want to watch the video again. I think in this video I covered the criteria that determine hobby vs business.

@deborahoates7773 3 года назад

You should use a mic.

@IntentionalFinance101 3 года назад

Thanks for watching... some do have poor quality. I have improved that in newer videos.

@safetysapien2755 Год назад

Yes you have, this comment should be seen by everyone who has told them selves “I need a better microphone “ among the other excuses to not start making, writing and putting out content. Thanks for your perspective and knowledge. Very useful.

@jc1452 Год назад

If the eBay selling is reported as a hobby income on 1040 schedule 1 line 8, do we report the gross income or gross profit which is calculated by gross income minus cost of goods sold? The rules say hobby income cannot deduct business expenses but the cost of goods is the cost not the expense. How would you interpret the amount that needs to be reported as income on line 8? Thanks in advance.