It’s come time again to do your taxes and you’ve discovered a pleasant surprise which turns out to be something of a mixed blessing. Although the bulk of your income comes from your “regular” job, when you sat down to look at what you earned this past year, you were surprised to see that you actually made some money from the freelance work that you were doing. This is thrilling! As you look at the numbers, you begin to daydream about eventually quitting your “real” job and doing freelance work full time.

But eventually, you pull yourself out of your daydream, look at the mess of papers on your desk and realize that you have an issue to deal with. That issue is your taxes. More specifically, the issue is whether or not the freelance work that you used to do as “just a hobby” is now considered a freelance business. What you hope is that it is. Either way, if you earned money from freelancing, you have to count it as income on your taxes. But if your freelance work has crossed the line from hobby and can be considered a business, then you can also deduct some expenses on your taxes. That’s when you know you’ve made it as a freelancer!

So how do you know if the government considers your freelance work a hobby or a business? It’s kind of an iffy situation because it doesn’t come down to how much you earned from the work or whether you worked elsewhere fulltime. It’s a lot vaguer than that. But what it boils down to is that your freelance work is considered a business if you approach it as a business. This means that if you regularly apply for paid writing jobs, keep invoice sheets and organized records of your work and income and have set financial goals for yourself, then you consider your freelance work to be a part-time business and the government will as well.

So what if you haven’t done those things? Well, if you aren’t applying for paid jobs, then you can’t consider yourself a business. But if you do regularly apply for work, even if you don’t get it too often, then you’re trying to run a business and you can probably prove that. The best thing to do is get organized about your work. Keep records of where you apply and what jobs you do. Even if you only do a little bit of freelance work now and then, if you keep clear records and you make an effort to earn more income this year than next, you’ve got business written all over you. Not only does this mean that you can deduct normal business expenses from your taxes but it also means that the thing which was once your hobby is going to keep earning you more and more money as a business. How exciting is that?

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