Can photography income be from both a hobby and a business?

by Harold P. Eck, CPA | Jun 03, 2019

askacpaiconCan photography be a hobby and a business? I've sold photography prints of my travels over several years, but I have treated it as a hobby. Now, I'm starting a sole proprietorship business as an event photographer and will treat the income as business income. Would my photo print sales (from my travels) now also be considered business income?

The simple answer to the question on whether an activity can be a hobby and a business is yes. The determining factor in whether your photography is a hobby or a business is whether or not it is engaged in for profit.

Your activity as an event photographer is clearly a business activity engaged in for profit, and it will be subject to the income and deduction rules and regulations for a business conducted as a sole proprietorship. The net income earned by a sole proprietor in the operation of a business is reported on Schedule C and is subject to federal income tax and self-employment tax. The self-employment tax rate is about 15 percent. 

Beginning in tax year 2018, for determining taxable income for the federal income tax, the net income from a sole proprietorship is reduced by the 20 percent qualified business income deduction. It is important to note that the net income from a qualified business is reduced by 20 percent only for the federal income tax, but not for self-employment tax.

The hobby portion of your photography income is the sale of photographic prints that you shot while on recreational travel. Hobby income is reported on line 21 of Schedule 1 of Form 1040.  Prior to tax year 2018, deductions for hobby income were limited and were deducted on schedule A as itemized deductions in the greater than 2 percent of adjusted gross income category. For tax years between 2018 and 2025, this deductibility was eliminated, making hobby income taxable while eliminating the deduction of the indirect costs of producing the hobby income. 

The hobby income from the sale of the prints is reduced by the direct cost of goods sold. In your case, the direct cost of goods sold would be the cost to produce the actual print. Also, hobby income is not subject to the 15 percent self-employment tax.

So, yes, photography can be both a hobby and a business. The two separate categories of income are taxed differently, which means you should maintain clear records that show the sources of your income and deductions.

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Answered by: Harold P. Eck, CPA, is an individual practitioner in Jersey Shore, Pa.

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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