You've done the legwork or created the plan to turn your passion into a money-making venture. Whether your dream is to teach yoga, monetize your cooking or sell homemade jewelry online, you love your business idea so much you would do it for free.
While you should speak to a tax professional about your particular case, you may be able to write off that trip to Jamaica—if you're running a successful travel blog—or deduct a fancy lunch if you are using it to impress a potential client for your profitable part-time pie-making business.
But before you leave money on the table, consider that your pretirement gig or side hustle may not only create a nice income stream but it could open the door to certain tax deductions. While you should speak to a tax professional about your particular case, you may be able to write off that trip to Jamaica—if you're running a successful travel blog—or deduct a fancy lunch if you are using it to impress a potential client for your profitable part-time pie-making business.
Certain experiences, not just certain things, might be deductible business expenses.
The key is proving you have a business and not a hobby. According to the IRS, that depends on whether:
- You maintain accurate books and records and have receipts for expenses greater than $75
- You have notes and records to show you put effort into making the business profitable
- You depend on the income for at least some of your livelihood
The IRS also looks at whether the expenses are both "ordinary and necessary," meaning they would be common and expected in your industry. For example, I earn income as a writer, and one of my plans is to write a book about healing practices throughout the world. In order for me to do this, it would be expected that I would have to visit different places and interview the people who live there and allow them to show me some of their healing rituals and customs. While I will have to follow certain rules—such as spending the majority of my time there working—I may be able to deduct some of the travel, lodging and food expenses in the process. I will talk to my accountant to be sure.
Cash in on Your Passion
While you shouldn't start a business solely to write off certain activities, here are some ways potential hustles can pay off when tax time comes around.
Caterer
You cater celebrations such as family reunions in your spare time. Not only might you be able to deduct food ingredients for the meals you prepare for others, but you may be able to deduct ingredients that you use when practicing new recipes at home. Creating new meals could be considered research for your line of business, according to Keeper Tax, a tax platform for freelancers and gig workers. That doesn't mean you can write off all of your family meals as practice sessions. However, for any ingredients you write off, keep notes on what you created, when you created it and whether you added it to your menu. You also may be able to deduct equipment you use to cook or display food.
Online craft shop operator
The Etsy shop you started for fun is now attracting a steady stream of business. The materials for your crafting projects may be able to be written off whether you're sewing, making jewelry or crocheting, according to tax software provider Intuit. Then there are the costs associated with going to craft shows and conferences to get new ideas about improving your art, as well as the subscriptions for the craft magazines you love to read, says craft inventory software provider Craftybase. Just be able to show that your purchases are helping to make you profitable.
Fitness coach
If you're ready to build a business helping others get their bodies in shape, you may be able to write off gym memberships, fitness classes, exercise equipment (yes, even that Peloton), yoga mats and other fitness-related purchases. If you use music streaming services to motivate clients, those costs may be able to be written off, as well, according to Keeper Tax. As long as you can show that you have clients, anything that makes you a more effective teacher could possibly be fair game. Your tax professional is the best person to judge your particular case.
Blogger, Vlogger or Influencer
One of the biggest perks of starting a successful blog or cultivating a social media following is being able to write off content-related costs, according to CPA tax filing service Flyfin. That means you may get a deduction for things that are associated with whatever you blog or talk about. If your main subject matter is food, you may be able to write off cooking ingredients or restaurant meals, according to Kelly Phillips Erb, a tax law expert and tax blogger known as Taxgirl. If you are a travel blogger, you may be able to write off parts of your trips as long as you can prove they are predominantly business-related. If you run a mystery book blog, you may be able to write off mystery books. Again, it all comes down to showing that your efforts are moving toward a profitable enterprise, so if your wine education blog is only getting 10 or 15 weekly visitors—likely not enough for you to make a profit through ads, affiliate links or product sales—you may have to wait and look for write-offs when it's a little more established.
Makeup artist
If you have a knack for beauty and you're using your skills to help others shine at their weddings, retirement parties and other special events you may be able to write off makeup, face brushes and different ointments for your kit., Fashion shows may spark your creativity or be a place where you can find potential clients so they may be a potential write-off as well. Books and courses you need to stay abreast of the industry may also be considered a write-off when tax time comes around, according to Keeper Tax.
I've always believed that work shouldn't be a chore and a side hustle should be something we enjoy. While a tax professional can let you know what write-offs are acceptable for your personal situation, by matching your hustle with your interests you may be able to cash in in more ways that you thought.
