I have a talented client who, after retiring from a prestigious career and honing his skills as a photographer, has produced an impressive body of visual art. His collection includes images of models who pose for photographs for their professional portfolios. My client has invested tens of thousands of dollars in his equipment and operates in a business-like manner, so how can he be sure that his work qualifies as a hobby as opposed to a business? There is no black-and-white rule, but here are nine factors to be considered in distinguishing between a hobby and a business.
In my client’s case, he is clearly engaging in a hobby as he charges nothing for his services and did not previously engage in any similar enterprise for a profit. True, he doesn’t get to deduct any costs related to his hobby; but, creating beautiful photographs gives him pleasure, and doing it for free keeps life simple!
If you do something creative and depend on income from that activity for your livelihood, even if you suffer periodic losses or don’t invest a lot of time in the activity, you may be engaged in a business. If you have any doubts about whether your hobby is really just a hobby, please give us a call at (248) 477-6300.