Tax Season: Is Gig Work a Hobby? + 2025/2024 Tax Software for Filing Online
Tax Service Resources for 2025/2024. Income Tax Filing in 2025. Available to Purchase Now.
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Is your gig work or side hustle taxable income? Hobby vs. Business?
You're making money doing your heart’s passion, knitting crafts for your social media group, building bio websites, or maybe even doing voice-overs as Bugs Bunny’s “Be Very Quiet” classic.
That’s wonderful. However, consider an important question: is this a profitable hobby or a taxable business? The difference can impact your tax return, so let's dive in.
This post will help you navigate the foxy world of hobby versus business. We’ll use the IRS guidelines to help determine your classification for tax purposes. We'll cover everything from identifying key factors to understanding when and how to file.
Hobby or Taxable Income Business: What's the Difference?
There can be a fine line between hobby and business, especially in this age of side hustle mania and gig economy. To clarify, a hobby is something you do for enjoyment, relaxation, or personal fulfillment.
On the other hand, a business is an activity you engage in with the primary intention of making a profit. Even if you're passionate about your activity, the IRS looks at the facts to determine your intent.
Questions To Ask Yourself
The IRS doesn't have a simple yes or no answer. Instead, they use questions to determine if your activity is a business or a hobby. They look at factors like:
Profit motive: Is your primary goal to make a profit, or is it primarily for pleasure?
Time and effort: Do you dedicate significant time and effort to the activity?
Expertise and skills: Do you have specialized skills or knowledge in a niche?
Business plan: Do you have a documented business plan?
Financial records: Do you meticulously track your income and expenses?
History of profit/loss: Have you made a profit in the past? Even consistent losses don't automatically disqualify something as a business if you can demonstrate a reasonable expectation of profit.
Amount of capital invested: Have you invested significant money in your activity?
Workspace: Do you have a dedicated workspace?
Business-like behavior: Do you act like a business with advertising, marketing, etc.?
Important Note: The IRS doesn't necessarily require you to meet all the tests. They weigh each factor and consider the overall picture. For a complete understanding, refer to the official IRS guidelines and tax guide for small business.
When and How to File Taxes for Your Activity
If the IRS determines your activity is a business, you'll need to report your income and expenses on your tax return (typically Schedule C for self-employed individuals). This means you'll be responsible for paying self-employment and income taxes.
You must report all income, including hobby income. The difference here is that hobbies are not subject to the 15.3% federal self-employment tax, but materials cannot be deducted as expenses.
Failure to report business income can lead to significant penalties. If it's a hobby, you don't need to report the income unless it exceeds a certain threshold (this can vary depending on your specific situation). Always consult a tax professional for personalized advice.
When to File: The tax filing deadline for most individuals is typically April 15. However, if you're self-employed, you may have options for extensions. Again, consulting a tax professional can provide clarity on your specific deadline.
TurboTax Software Download from Intuit for 2025 Filings (2024 Tax Year).
If you find out you are not a hobbyist and must file taxes this year, have no fear. With the correct filing information, top-tier software, and live support, you may find that you owe very little or even are eligible for a refund!
TurboTax software is an excellent example of an online software and IRS-approved e-filing provider. This year, new AI-improved enhancements like Intuit Assist rush your return process by analyzing documents and auto-filling information into their products. It may surprise you with how easy it is to file. Choose between DIY for solo filing, working alongside real-time tax assistants with video conferencing, or having the company file for you.
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There are 6 TurboTax software downloads for MAC/PC products for the 2024 tax year. Surf on over to the Intuit Store, where software prices are lowered now for a limited time before the full tax filing season rush in April. Additionally, make waves this year with new features like Credit Karma accounts to receive your refund 5 days earlier.
Paddle out to Live Tax Advice, a new feature where a tax expert is your lifeguard, rescuing you with one-on-one advice as you navigate the tax sea of forms and some brief questions.
Stay afloat with current tax laws, easily importing prior year data from most popular tax software application. Catch W-2s, investments, and mortgage info from your banks and other apps like a pro fisherman.
If you’re new to tax filing for personal and small business as an independent contractor, freelancer, or consultant, check out the Home and Business 2024-2025 Edition. You can purchase federal and State filing programs that locate industry-specific small business tax deductions. The audit scan will locate tax triggers and results for review.
Other editions for this year to ensure an accurate filing experience, completed checks for deductions and credits, and best refunds available are Basic (suggested for less complicated tax situations, claiming earned income credit and federal return only); Premier for investments and rental property; Deluxe (Best for maximizing deductions, recommended for homeowners, charitable contributions, high medical expenses, and need to file both Federal and State tax returns); and Business (for S and C corporations, multi-member LLCs or manage trusts and estates).
Conclusion: Know Your Status, File Accurate Taxes at a Discount with Quality Software.
Whether your passion project is a hobby or a business has significant tax implications. By carefully considering the IRS guidelines and understanding the differences, you can ensure you comply with tax laws and avoid potential penalties. Don't hesitate to seek professional guidance, especially if you're unsure how to classify your activity. Understanding your tax obligations is crucial for your financial well-being, so take the time to get it right! Make the most of every sand dollar and a splash with cash this year by sailing through TurboTax’s 2024-2025 tax software and e-filer for a smooth trip back to shore.
