Blogging: Is it a business or a hobby?
So as I embark on this wonderful journey into the world of blogging I thought to myself…so what exactly are the ways that I can earn a little bit of cash? And, of course, the next logical question from a tax accountant perspective is, would I have to report this income on my tax return?
After talking to some blogging friends, I guess the most common way to make money off a blog is through advertising, such as Google AdSense. Now I hear that Google won’t send you a 1099-MISC if you don’t make $600 in a year, but my guess is that if you make $599 off advertising, the IRS would like you to report it nonetheless. So I would keep track of your earnings. Hmmm…I will have to look into this thing they call advertising then.
So then I was thinking, is blogging just a hobby or is it a business? Income from a hobby or a business is considered taxable. For a hobby, deductions are allowed to offset income but never create a loss. But with a business, ordinary and necessary expenses are allowable deductions and can be deducted fully even if they create a loss. This loss can then be used to offset other income earned or be carried-foward or carried-back, depending on the situation.
So to be a business there are certain criteria. You have to be in the activity for the sole purpose of making a profit. You have to spend a considerable amount of time on the activity. Some use 500 hours a year as a standard. You basically have to make it look like you’re in business. Things like separate bank accounts for your business income, be knowledgable about your business, etc. If you think that your blog makes a considerable amount of money and can make it look like a business, then I think there’s a good basis for argument. I wouldn’t be writing this blog if I wasn’t looking to make a little extra dough. I mean, sure I enjoy it, but the number one purpose of it is to make a profit. But be aware that if you end up making your blog a business, then you’ll have to make estimated tax payments and pay self-employment tax.
I think I’m still in the hobby phase of blogging. I do know some people who make a considerable amount just blogging. It’s such an interesting world to me. And I’m glad to be a part of it!