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Hobby or Business: What People Need to Know if They Have a Side Hustle

Hobby or Business: What People Need to Know if They Have a Side Hustle

by Internal Revenue Service

Photo by The Nigmatic on Unsplash

Hobbies and businesses are treated differently when it comes to filing taxes. The biggest difference between the two is that businesses operate to make a profit while hobbies are for pleasure or recreation.

Whether someone is having fun with a hobby or running a business, if they are paid through payment apps for goods and services during the year, they may receive an IRS Form 1099-K for those transactions. These payments are taxable income and must be reported on federal tax returns.

There are a few other things people should consider when deciding whether their project is a hobby or business. No single thing is the deciding factor. Taxpayers should review all the factors to make a good decision.

How taxpayers can decide if it’s a hobby or business

These questions can help taxpayers decide whether they have a hobby or business:

Whether taxpayers have a hobby or run a business, good recordkeeping throughout the year will help when they file taxes.

More information: