This post is Day 5 of 30 Ways In 30 Days To Redesign Your Life With Photography. This series seeks to provide you with practical steps to get you from wherever you are today, to exactly where you want to be – this year! If your goal has always been to take your photography to a whole new level, hang on and start enjoying a new lifestyle you’ve always dreamed of.
A hobby can be different things to different people.
It might mean taking a camera along on vacations and to family events, snapping up a few images.
It might be taking a few portraits or shooting a few weddings for people you know, making very little, and doing it more for a portfolio.
However you define it, I tend to look at the way the IRS defines it.
The IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year. A person should be able to able to determine if its hobby or business by asking the following questions:
- Does the time and effort put into the activity indicate an intention to make a profit?
- Does the taxpayer depend on income from the activity?
- If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?
- Has the taxpayer changed methods of operation to improve profitability?
- Does the taxpayer or his/her advisors have the knowledge needed to carry on the activity as a successful business?
- Has the taxpayer made a profit in similar activities in the past?
- Does the activity make a profit in some years?
- Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?
For me, your photography turns from hobby to business the minute you decide you want it to be a business. If you feel you can in any way generate income from taking photographs, and you are ready to set out on the adventure called entrepreneurship, then you are ready to start a photography business. [Read more...]
