How do you sell a hobby / craft but avoid it being viewed as a business?

I tried building a few different styles of bird houses and bird feeders as a hobby.  I've never considered selling any, I just enjoy them myself and I've given a few away as gifts.  Over time I've managed to build too many for my personal collection and I was told if I want to try building some different styles I need to sell a few of what I have.  I'd like to buy some small power tools like a bench top drill press, band saw, table saw, lathe, I was told to use the money from selling some bird houses if I want to buy more tools.  

Selling can be expensive.  If I put these on eBay, there is listing fees, final value fees, paypal fees, shipping fees, etc.  I looked into a local Home & Garden show and they want $150 for a table.  I'd have to sell a couple dozen bird houses just to break even.  Going to a number of area shows, I get $2,000 from sales but subtract expenses and I'm left with $200 profit.  

The tax professionals I go to charge extra for additional sources of income, but they are fairly reasonable with one W-2 and standard deduction.  The sad part is if I make an extra $600 selling bird houses and have $500 in expenses they charge me an extra $200 to figure it into my taxes.

I don't really know anything about having a business, so I don't want it to become a business    

5 Answers

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  • Eva
    Lv 7
    1 month ago

    You can report it as hobby income (other income line on the 1040), but you have to declare the full amount of your sales and don't get to deduct the expenses at all (law change in 2018). That would eliminate the extra fee from the accountant. Your other problem may be collecting and remitting sales tax on your sales if your state requires it.

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  • 1 month ago

    Hobbies make under $500 a year. You can sell on eBay, Etsy, Bonanza or any of the other crafting sites.

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  • 1 month ago

    Here's the problem. If you have a business, you can deduct your expenses and only the profit is taxable. If you do it as a hobby, all sales are taxable and you cannot deduct the expenses. The 2018 tax law increased the standard deduction but eliminated some other deductions. One of those was the miscellaneous deduction on Schedule A, where you would have claimed those hobby expenses. So anything you sell, you must report the full amount of all sales but you cannot deduct any expenses if you are a hobbyist. You'll lose quite a bit of money that way - UNLESS your hobby sales plus your work income together are not over the $12,400 for 2020, the point at which a single filer will start to owe income tax.

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  • Judy
    Lv 7
    1 month ago

    If it's a hobby and not a business, still needs to be reported on your tax return.

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  • 1 month ago

    Even if it is not viewed as a business, it still has to go into your taxes. There are only two ways to get out of having to figure it into your taxes:

    1) Just give them away for free -- don't sell them.

    2) Make sure the expenses are high enough and the prices low enough so that you don't have any profit.

    If you make a profit from a hobby, then it must go into your taxes.

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