July 2nd, 2011 → 8:08 pm
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How do you know if you have a hobby or a business? There is not set dollar threshold that changes a hobby writer into a professional.
It depends primarily on your motivation for writing.
The IRS has a few factors to consider:
- The time and effort you spend in the activity can determine hobby status. Spending significant amounts of time writing might imply that your writing is more than a hobby and it is a business.
- The manner you conduct the activity such as doing advertising or bookkeeping may mean your hobby has become a business.
- Your expertise and prior success in a similar activity may cause your hobby to be classified as a business. An author with a publishing contract has a business, not a hobby.
- Your profit motive and prior history of profits may indicate a for-profit business, not a hobby.
- Other sources of income may demonstrate your writing is not your main source of income, but only a hobby.1
Also see the IRS article Is Your Hobby a For-Profit Endeavor? at http://www.irs.gov/irs/article/0,,id=186056,00.html .