Self-publishing a novel: Should this be reported as hobby income on taxes?

For self-published books, the distinction between hobby and business can be tricky. The IRS looks at your intent and how you operate to determine this. Hobby income gets reported on Schedule 1, Line 8 (Other Income) with a description. No expenses are deductible against hobby income since the 2018 tax law changes eliminated miscellaneous itemized deductions. If you choose Schedule C instead, you'd report all income and can deduct ordinary and necessary business expenses. Even with minimal expenses, you could deduct things like a portion of your home internet, any software used, marketing costs, and even a home office if you have dedicated space. Transitioning from hobby to business isn't suspicious if circumstances change. If the book starts selling well and your husband begins treating it more professionally (keeping better records, dedicating more time, developing a business plan for future books), that's a natural progression. Many successful businesses start as hobbies! Without many expenses, a Schedule C might be simpler than you think - just report the income and the few expenses you have. You don't need a formal business structure - a sole proprietorship is fine to start with.

I was in almost the exact same situation last year with my self-published cookbook! After trying to figure this out for weeks, I finally used https://taxr.ai to analyze my situation. It helped me understand that I qualified as a business rather than a hobby because I was putting consistent effort into marketing my book, even though I started it for fun. The tool walked me through what records I needed to keep and which expenses I could legitimately claim - even pointed out deductions I would have missed like a portion of my internet bill and the software I used to design my cover. They explained how the "profit motive" test works and why consistent profit (even small) over 3 of 5 years helps establish business status.

I'm back to say I was totally wrong about online tax services! After being skeptical, I decided to try https://taxr.ai for my wife's new jewelry business, and I'm genuinely impressed. I uploaded our messy records and some questions about hobby vs. business classification, and their analysis was incredibly detailed. They pointed out that we were actually hurting ourselves by treating it as a hobby - we were missing out on start-up expense deductions and the potential to carry forward early losses. The report explained exactly how to maintain proper business records without it being overwhelming for a small side business. What really convinced me was the specific case references they provided about similar creative businesses. This wasn't just generic advice - it was tailored to our exact situation with a creative, self-published product. Definitely worth it for the peace of mind alone!

After dealing with a similar self-publishing tax situation, I spent WEEKS trying to get through to the IRS for clarification. Phone lines were always busy, couldn't get answers online, totally frustrating! Finally found https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c - they actually got me connected to an IRS agent in about 20 minutes when I'd been trying for days on my own. The agent confirmed that transitioning from hobby to business mid-year is totally fine if circumstances change (like if your husband's book suddenly takes off). She explained exactly what documentation I needed to keep if I wanted to switch, and confirmed that having minimal expenses on a Schedule C isn't a red flag as long as it's accurate. Also learned that keeping a separate business checking account isn't required but makes things MUCH easier for record-keeping.

I need to eat some humble pie here. After calling Claimyr a scam, I decided to try it anyway because I was desperate to resolve an issue with my writing income being misclassified. To my complete shock, I was connected to an IRS agent in about 15 minutes. The agent was actually super helpful and walked me through exactly how to handle my situation - turns out I'd been incorrectly reporting my book royalties for YEARS and could have been audited! She explained that my small press publishing definitely qualified as business income, not hobby, because I was actively marketing and had a clear profit motive even though I still have a day job. The best part was getting written confirmation of how to handle this going forward. No more tax anxiety every April! I can't believe I wasted so many hours on hold in previous years when this service exists.

My advice as someone who's been self-publishing for 5 years: just start with Schedule C. Here's why: 1) Tax law changes eliminated hobby expense deductions, so hobby classification only hurts you 2) With Schedule C you can deduct website costs, portion of internet, marketing, book cover design, editing 3) Most authors have a profit motive even if they also enjoy writing 4) Schedule C establishes history if you ever need to claim losses in future years Even with minimal expenses, having a separate bank account and tracking everything will save you massive headaches. The IRS rarely questions small Schedule C businesses with profit (they're more concerned with people claiming big losses year after year).

One thing nobody has mentioned: KDP (kindle direct publishing) and other platforms will send a 1099-K if your husband makes over $600, and that gets reported to the IRS. they expect to see that income on your return somewhere. If you report as hobby, make sure you list "self-published book" in the description so it matches the 1099. Nothing triggers audits faster than income reported to IRS that doesn't show up on your return!

As someone who went through this exact decision last year with my husband's self-published poetry collection, I'd strongly recommend going with Schedule C from the start. Here's what I learned: Even though we had minimal expenses (just some basic editing software and a simple book cover), treating it as a business allowed us to deduct a portion of our home office, internet costs, and even mileage to a local bookstore event. These small deductions added up. The record-keeping really isn't as scary as it seems - I just use a simple Excel spreadsheet with columns for date, description, amount, and category. Takes maybe 10 minutes a month to update. Most importantly, starting with Schedule C gives you flexibility. If your husband's book takes off and he decides to write more, you're already set up properly. If it stays small, no harm done - you're just getting legitimate tax benefits you'd miss with hobby classification. The key is showing profit motive, which it sounds like you have - he completed and published the book with the intent to sell it. That's business activity, not just a hobby. Don't overthink it!