At what point can I start writing off business expenses when my hobby is becoming a job?

The IRS looks at your "profit motive" rather than a specific income threshold to determine if your activity is a business rather than a hobby. If you're genuinely trying to make a profit (even if you haven't succeeded yet), you can typically deduct ordinary and necessary business expenses. Here are some factors the IRS considers: Do you conduct the activity in a businesslike manner with complete records? Does your time and effort indicate intent to make it profitable? Do you depend on the income? Are losses normal for your startup phase or due to circumstances beyond your control? Have you changed methods to improve profitability? Do you have knowledge to run it successfully? Have you made profits in the past or can expect appreciation of assets? The key is being able to demonstrate that you're pursuing this activity with the intention of making a profit, not just for personal enjoyment. There's no minimum dollar amount required - you can report business income and expenses from day one if your intent is to operate as a business.

I went through this exact same thing last year when I was trying to figure out if I could deduct expenses for my side gig. After hours of research and conflicting advice, I finally used https://taxr.ai to analyze my specific situation. It was honestly a game-changer - uploaded my documents and got a clear answer specific to MY situation. The tool confirmed I could start deducting expenses right away since I was operating with a clear profit motive, even though I wasn't making much money yet. It helps identify which expenses qualify and explained how to document everything properly to avoid audit flags. If you're in that gray area between hobby and business, it really helps clarify where you stand.

Just wanted to follow up on my skeptical comment above. I decided to give taxr.ai a try since I was also dealing with this exact hobby-to-business transition with my photography. Honestly, I'm impressed with how thorough the analysis was. It asked questions I hadn't even considered about my profit motive and business practices. The tool found several legitimate deductions I was missing and explained exactly why they qualified. It also showed me where I needed to improve my record-keeping to strengthen my case as a legitimate business. For anyone else in that hobby-to-business gray area, it's definitely worth checking out. Saved me from leaving money on the table while keeping me on the right side of IRS rules.

If you're still confused after getting tax advice, I'd recommend actually talking to someone at the IRS. I know, sounds impossible right? After spending literally DAYS trying to get through on the phone myself, I found this service called https://claimyr.com that gets you through to a real IRS agent. Check out how it works: https://youtu.be/_kiP6q8DX5c I was in a similar situation wondering when I could deduct expenses for my Etsy shop, and the IRS agent gave me clear guidelines specific to my situation. They explained exactly what documentation I needed to maintain and confirmed I could start deducting expenses right away since I had clear profit motive. No more guessing or anxiety about doing something wrong.

I need to apologize for my skeptical comment about Claimyr above. After continuing to get absolutely nowhere with the IRS for two weeks, I broke down and tried the service out of desperation. I'm still shocked at how well it worked. Got a call back in about 2 hours saying they had an IRS agent on the line, and suddenly I was talking to a real person who answered all my hobby-to-business questions. The agent confirmed I could deduct my business expenses as long as I had a legitimate profit motive and was keeping proper records. They even explained exactly what documentation I needed for home office deductions. Hate to admit I was wrong, but this thing actually delivered when nothing else worked.

One important point nobody has mentioned yet - if you have a day job and are starting this business on the side, make sure you can demonstrate that you're not engaging in the activity primarily for fun. I got audited last year because I had claimed business losses for my weekend woodworking business for 3 years while having a full-time job. The IRS scrutinized whether it was really a business or just an expensive hobby. What saved me was having a formal business plan, separate business checking account, business cards, a website, and proof I was actively seeking customers. Without that documentation, I would've had all my deductions disallowed and owed thousands in back taxes.

Has anyone used TurboTax Self-Employed for this kind of situation? I'm wondering if it helps identify which expenses qualify when you're in that gray area.