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Is Blogging a Business or a Hobby for Tax Purposes?

As your successful blog begins to make money, you’ll soon have to grapple with this one question: Is your blogging just a hobby or is it a legitimate business?

The answer can make a big difference on your taxes. The wrong answer cause some real IRS headaches.

So which one is it? Is it hobby or is it a business? The answer is, it depends. If all you want to do is blog for the sake of blogging, it’s more likely a hobby. If you’re seeking to make a profit as well, you’re probably running your own business instead of a hobby.

A blogger sitting at his laptop looking off into space thoughtfully with a thought bubble that reads Is this a hobby or a business?

Those are of course pretty simple definitions. There is some more in depth criteria that we need to look at. Your actions and how you approach your blog also pay a role in whether it’s a hobby or a business. We’ll dive into all of that here, as we talk about:

Pros and cons of being a hobby or a business

There was a time this wasn’t that much of a question. When blogging started, it was almost always a hobby type of thing. Bloggers were sharing their thoughts and opinions and not really thinking about the money.

A lot of times people had no clue you COULD make money blogging.

Times have changed. Now there are options. As you start getting visitors, maybe someone wants to sponsor your page. Or they’ll give you things to try out. So is it better to keep it as a hobby, or is there a point it makes more sense to dive in and make it a real business?

In the end, it really depends on what you want to do.

If you prefer a more causal approach where you’re just doing it for the love of writing and putting your thoughts out there for the world to see, you may lean towards keeping it as a hobby. However, if you feel like there’s some real earnings potential out there, you might get serious about it being a business.

We’ll look at some of the pros and cons of both approaches.

Pros of blogging as a hobby.

A new blogger sits at her laptop along with a cup of coffee, looking at a site that is entitled How to start an interesting blog.

The biggest pro of blogging as a hobby is the simplicity. You just blog when you want, where you want, all for the love of writing and blogging. You just post a blog post when you want to write. It really doesn’t get much better than that.

Taxes are much simpler when it’s a hobby. If you do make money on your blog, you just claim that money as “other income” and it all goes into your total income for figuring out your income taxes. You don’t have to deal with self-employment tax when it comes to hobby income.

You usually don’t have to worry about business regulations, licenses, or any of that. You’re just making a few extra bucks here and there and it’s all good.

There are some cons to treating it as a hobby.

Even though it’s not a business, you still have to pay taxes on the income. Unfortunately, you can’t claim any of the expenses or costs related to your blog when it’s a hobby.

If you’re treating it as a hobby, you do end up limiting what you can do with the blog. There’s less room to grow because often the things it takes to grow your blog can be interpreted as business activities.

Finally, calling it a hobby doesn’t necessarily protect you from the business aspects of a blog, especially if you are making money. Some local governments may still require that you have a business license. You can still get in real trouble for copyright infringement with words, pictures or other media on your bog. Increasing regulation on the internet may mean you still have to treat your own blog as a business in some ways.

Pros of blogging as a business.

A desktop with several business tools, files, reports, and a laptop. An arm with a dress shirt is pointing at the screen of the laptop which reads "Blog."

I’ll speak from experience on one of the biggest pros of blogging as a business. I love that I can make money, to the point of earning a living, doing something I love doing. There’s incredible freedom in that.

Treating it as a business gives you more freedom to grow both your blog and your income. You can be more proactive about increasing your profitability and your readership.

As a business, you can write off the costs of running your blog. Your business income is taxed on profits rather than just what comes in to the business, and that lets you claim the expenses.

One last advantage of being a business is there’s freedom. You don’t have to worry about whether you have crossed a line and done something that can be interpreted as ‘business activity.’

Cons of blogging as a business.

The biggest downside of treating it as a business is perhaps that it’s now a business. Sometimes we see that as not as fun or as enjoyable (though personally I don’t mind).

Blogging income as a business is subject to self-employment tax. That can be a substantial increase in costs. Taxes themselves get a bit more complicated, and there’s a greater need to be on top of things with your book keeping and records.

Once you decide that it’s a business and that you’re claiming expenses and all, that creates pressure to become profitable. That’s because if you haven’t turned a profit after awhile, the IRS could decide that it really was a hobby and they can take away those tax deductions you claimed in the past.

Depending on where you live, you may have to get a business license. You’ll have to decide at some point whether to be a sole proprietorship or to create a formal business entity.

One last thing is, once you decide it’s a business, you’re making a commitment of sorts. Now it becomes more real. It might feel more like an obligation. Could that rob you of some of the joy of blogging? I think that answer varies for everyone.

How it matters on your taxes if it’s a business or hobby

A stack of papers, one being a bar graph, a copule of pens and file clips, and a square black paper that reads "Tax Implications."

There are distinct advantages from a tax perspective for both blogging as a hobby and as a business. This article is part of our series on taxes for bloggers.

Income for a hobbyist is taxed as other income. It’s like interest, income, and certain retirement income where it’s only added to your overall income for income tax purposes.

By calling it a hobby you’re declaring you don’t rely on the income and that it’s very different than working for your money like with a job. Therefore, it’s not subject to FICA employment taxes (Social Security and Medicare taxes).

Unfortunately, you can’t write off any expenses. You will be taxed for every dollar that comes in, but you can’t reduce that by claiming expenses. There was a time that part of hobby expenses could be claimed as an itemized deduction, but that deduction was taken away starting with the 2018 tax year by the Tax Cuts and Jobs Act.

Everything is flipped if you’re operating as a business. The government sees it as you being self-employed, meaning you’re working for income that you rely on. That’s true even if it’s a side hustle. What that means is, you have to pay both income tax AND Social Security and Medicare taxes (now known as self-employment taxes) on that income.

The good news is, because it’s a business you have the ability to write off business expenses. You can enter your income AND expenses on form Schedule C, and it’s only the difference between the two that is your taxable income.

That opens the door to a wide variety of business deductions that can lower your tax burden.

In the end, the tax advantage for a hobbyist is not paying self-employment tax of 15.3%. The business blogger’s advantage is writing off business expenses (regardless of whether you take the standard tax deduction).

How does the IRS decide if it’s a hobby or a blog?

A hand drawing arrows on a chalk board as someone determines if a blog is a business or a hobby. Two arrows point to the right, labeled "For Profit?" and "Acting Like a Business?" while one arrow points left and is labeled "For Enjoyment?"

The thing to remember here is, the Internal Revenue Service doesn’t want this to be about which has the better tax advantage. It really is more of a question of whether you’re treating it like a hobby or like a small business.

Simply put, it comes down to two questions in the eyes of the IRS:

  1. Are you acting like a hobbyist or a business owner?
  2. Is your blogging profitable?

A hobby is any activity that a person pursues because they enjoy it and with no intention of making a profit. People operate a business with the intention of making a profit. Many people engage in hobby activities that turn into a source of income. However, determining if that hobby has grown into a business can be confusing.

IRS News Release: Here’s how to tell the difference between a hobby and a business for tax purposes.

The IRS put together a list of factors that determines whether what you are doing is a hobby or a business. All of the factors fit into one or the other of the two questions above.

Unfortunately, the list doesn’t always simplify the decision. That’s because a person can easily answer some of the factors in a way that looks like you’re a hobby blogger, and others that definitely look like a business.

If they ever were to evaluate what you’re doing, the answer could be subjective as to which side of things you fit more than the other. However, I think with most people once you ask all the questions, you have a pretty good idea where you fit.

The IRS does list nine factors elsewhere. I chose to use this list below because it was published more recently (April, 2022). We’ll take a brief look at each factor they list.

1. The taxpayer carries out activity in a businesslike manner and maintains complete and accurate books and records.

How much time are you putting into operating like a business? If you’re keeping books and records, that’s an indication that this is a business.

2. The taxpayer puts time and effort into the activity to show they intend to make it profitable.

Here’s a great way to look at it: How did your money making opportunity come from? Did someone approach you with an offer? Or did you seek out the opportunities. If you’re the one reaching out to sponsors or affiliates or things like that, that’s going to fall on the business side of things. Blogging can be hard work even as a hobby, but the more you pour into it, the more it becomes more of a business.

3. The taxpayer depends on income from the activity for their livelihood.

These days, you could say you depend on any and all money that comes in, no matter where it came from. But the idea here is, the more you rely on the money you make, either full-time or as a part-time deal, the more it’s going to point to being a business.

4. The taxpayer has personal motives for carrying out the activity such as general enjoyment or relaxation.

This all boils down to why are you doing this? Is the general enjoyment or relaxation enough that you would be fine continuing regardless of income, or does money become a part of the reason?

5. The taxpayer has enough income from other sources to fund the activity

Are you paying the costs of doing this out of disposable income that you got from somewhere else? Or is the goal for your blog to be self sufficient? If you have enough money to fund your activity personally and you do fund it without relying on income from your blog, that can be evidence of a hobby.

6. Losses are due to circumstances beyond the taxpayer’s control or are normal for the startup phase of their type of business.

Loss is often a part of operating a business. Was the loss related to the business itself? Is this a matter of trying to write off some expenses in order to incur a loss, or is the loss a natural part of starting your business. Are you operating at a loss because it just takes time before the money comes in but you still have expenses?

7. There is a change to methods of operation to improve profitability.

What’s the motivation for how you change the way you do things? Are you changing the layout of your blog because you think it looks better? Or are you updating posts for SEO purposes so you can get more traffic and more earning potential? If you’re adjusting how you do things so it might make more money or to improve the bottom line, there’s a good chance it’s a business.

8. Taxpayer and their advisor have the knowledge needed to carry out the activity as a successful business.

Let’s be honest. Most of us here probably fall into the hobby side of things. Business? What do you mean business? Sometimes we’re like the accidental business owner. However, the very fact that you’re looking into information like is an indication that you’re seeking out that ability and knowledge.

I think a lot of this particular factor is looking for if there’s a business motivation involved in starting the blog.

9. The taxpayer was successful in making a profit in similar activities in the past.

If you ran a blog and made money from that blog in the past, the fact that you’re going about it again is a pretty good sign this is not a hobby.

10. Activity makes a profit in some years and how much profit it makes.

Here we get into that second question: Is your blogging profitable?

A lot of the factors up to now seem geared towards people claiming it’s a hobby when it’s really a business. Now we’re getting the other side. This is all about the people who want to call their hobby a business so they can write off the costs.

If you haven’t earned a profit at least three out of five years, there’s a high probability that the IRS will determine that this is a hobby.

11. Whether the taxpayers can expect to make a future profit from the appreciation of the assets used in the activity.

Have you seen what some blogs can sell for?

This is a good segue iinto an important point: Your blog is not a business. The blog is a tool and a way to operate and grow your business. That makes it an asset. If the growth of your blog leads to the potential of selling that blog or increases the sales value of the blog, that’s an indication that this is a business.

How do you weigh all of these?

Most of us probably don’t need to weigh them. You get a pretty good idea reading through these factors. The more that money and profit (either now or long term) are part of the picture, the more that this is a business. The less you care about the money to the point that all you want to do is blog, the more that this is a hobby.

Infographic that identifies the differences between hobby and business blogging including motive for blogging, the kind of activity, how taxes differ, and if a blog is profitable, with the question asking Which one are you?

What if the IRS disagrees with your classification?

The thing is, when you decide one way or the other, you need to act like it’s what you decided. Some are going to call it a hobby when it’s really a business, just so they can dodge the self-employment taxes. Others are going to call it a business when it’s really a hobby just so they can write off personal costs they couldn’t normally claim.

If the IRS were to audit you, they could look at all the factors above and decide that your hobby blog was really a business, or vice versa.

If you claimed a business and they said it was just a hobby, any expenses you’ve written off in the past can be disallowed. What that means is, your income for past years would increase, and you’ll be liable for taxes for that additional income.

However, if you claimed it was a hobby and they decided it’s really a business, they can come back and say that you’re liable for self-employment taxes for previous years.

Either way, you could be looking at additional costs including back taxes, penalties and interest. That’s why this is such an important thing to get right.

How to treat your blog if you want it to be a business

Action Steps illustrated by a series of right facing block arrows, each arranged above and to the right of another arrow to create the shape of a stairway with the letters spelling Action set over each step.

If you’ve decided that you are running a blogging business, the main thing here is to treat it like a business. The things you want to do are to make it clear that the intent is to be a business, and to be profitable. Here are some thoughts that come from the IRS factors listed above.

1. Create a plan. It doesn’t need to be a formal business plan (though it doesn’t hurt if it is). If you have something written out about what you’re planning to do, what sources of revenue you expect to find, and the action steps you can take to be profitable, that can be good documentation that your intent is to run a business.

2. Keep records. Use an expense tracking program, a spreadsheet, or even written ledger. List all of your expenses and all of your income. The more you do the things that businesses do (like bookkeeping) the more the IRS believes you’re a business.

3. Think about a business structure. Look into getting an EIN (Employer Identification Number) at the very least. Check into whether an LLC or some form of corporation makes sense for you.

4. Get a bank account for your business transactions. It’s a very good practice to have separate bank accounts for busines and personal activities. Keep business and personal finance transactions separate from one another. If you’re just starting out and aren’t making money yet to cover your expenses, make deposits personally into your business account as an owner’s investment rather than paying for hosting and other expenses out of your personal accounts.checking account.

5. Be profitable. I know that in the first year or two of a blog that’s easier said than done. The IRS is looking for profits three out of five years. If you’re not sure you’ll be profitable by the third year, maybe consider not filing and claiming expenses until you start making money.

How to treat your blog if you want it to be a hobby

The main thing if you want to make sure you can maintain hobby status is that your blogging needs to look like and BE a hobby.

1. When someone approaches you with money making opportunities, document that you were approached. Avoid the impression that you were seeking out business opportunities.

2. Make sure that financial transactions are personal rather than looking like a business deal. Expenses and income are tied to personal accounts. Hosting and other expense accounts are associated with you personally rather than to what can look like a business name.

3. Avoid activity that looks like you are seeking out ways to grow your income or increase profits such as active outreach or advertising for opportunities. Be careful about activities such as your social media presence that could look like branding for your blog.

Additional Questions about Business vs Hobby for Bloggers:

We’ll cover some common questions that I see related to tis topic that may or may not have been specifically covered above:

At what point does a hobby blog become a business?

Your blogging moves from being a hobby to a business the moment that monetization of the blog starts to play a role in how you do things. When profit becomes part of the reason for your blog or it influences how you do things on the blog, your blogging has now become a business. At some point profitability plays a role as well, though it’s possible to be profitable and still be a hobby.

Pat Flynn tells the story of how his first online business was really an accident. He set up a blog as a way of organizing notes so he could study for an architectural certification. Pat soon found that others were coming to his site (often hundreds per day) because they found it on Google. He hadn’t really intended to make it a public site at all, and now he was getting visitors left and right. It was only then that he started experimenting with Adsense and other revenue.

That happens with a lot of us. For new bloggers it’s often a hobby, but somewhere along the line we realize that the traffic we’re getting can become an income source. That’s usually when we transition to being a business.

How much can you make on a hobby blog before it becomes a business?

The IRS really doesn’t have a set amount. Hobby income is reported on Schedule 1 of your IRS tax form, and significant amounts of hobby income listed year after year could get the attention of auditors.

How much can you make as a hobby blogger before you have to pay taxes?

Any income received as part of your hobby needs to be reported on Schedule 1 of your tax return.

If any business pays you $600 or more, or you get more than $600 through payment processors, the IRS requires them to report that income to you and to them. At that point the IRS knows about your income and failure to report it would be unwise. Do not make the mistake of thinking that income less than $600 does not have to be reported.

Do you have to pay tax on a hobby business?

All income from your hobby is taxable. However, there’s no such thing as a “hobby business.” The term is an oxymoron. It’s either a hobby or it’s a business. If you are treating it as a business in any way with a profit motive, then it is no longer a hobby and must be treated as a business.

Do I need to register my hobby as a business?

If it’s a true hobby, no. Income from your hobby is reported as other income on your 1040 tax return. Some municipalities may require a business license for any revenue generating effort, at which point you really are operating a business and not a hobby.

Where do I write off my hobby expenses?

You can’t. As of the 2018 tax year the Tax Cuts and Jobs Act has eliminated the deduction for hobby expenses. Prior to that, hobbyists could write off a portion as an itemized deduction.

Can my blog be a business even if I have a day job?

Absolutely. It’s very possible to operate a side business regardless of whether you have a full-time job or if blogging is the only thing you do. What matters more is how you treat your work as a blogger.