A lot of people assume: “If I spend money trying to build my side hustle, I can deduct it.”
Not always. The IRS makes a big distinction between a hobby and a business.
The Reality: IRS Hobby vs. Business Test
- Business: You’re actively trying to make a profit. You can deduct expenses.
- Hobby: You’re doing it mainly for fun. You can’t deduct losses, even if you spend money.
The 9-Factor Test (Explained Simply)
The IRS looks at several things (don’t worry, we’ll keep it plain English):
- Do you keep good records (income + expenses)?
- Do you depend on the income?
- Do you put real effort into making it profitable?
- Have you made a profit in 3 of the last 5 years?
- Do you change strategies if it’s not profitable?
- Do you have knowledge or hire experts?
- Have you made a profit from similar activities before?
- Is there a chance of appreciation (like investing in assets)?
- Is it mostly recreation?
The IRS doesn’t expect you to hit all nine—but they look at the overall picture.
Why It Matters for Creators
- TikToker with no income = hobby. Expenses aren’t deductible.
- Twitch streamer with ad revenue and subs = business. Expenses may qualify.
- Influencer going to events, tracking receipts, earning sponsorships = business.
- OnlyFans creator posting casually, no income yet = hobby.
Quick Example
Casey spends $2,000 on camera gear for YouTube. She makes $0 from her videos. The IRS says ❌ hobby—no deductions.
Jordan spends $2,000 on camera gear and makes $8,000 from sponsorships. ✅ Business—deductions apply.
Bottom Line
The IRS doesn’t care what platform you use—it cares whether you’re actually running a business. If you’re trying to make a profit, you may get deductions. If it’s just for fun, it’s a hobby.
General information only—confirm with current IRS guidance or a tax professional.
👉 Not sure if your side hustle qualifies as a business?
- Track your expenses now with our free Expense Tracker.
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