Well, simply put: a business operates to make a profit while a hobby is solely for recreation. 

According to the IRS, there are 8 questions you should consider when determining if an activity is just a hobby or if it is a business:

1. Is the activity carried out in a businesslike manner? Meaning, do you maintain complete and accurate books and records?

2. Does the time and effort you put into the activity show that you would like it to be profitable?

3. Do you depend on this income from the activity?

4. Are there any losses? If so, are they due to circumstances beyond your control or are they normal for the initial start up of the business?

5. Do you change methods of how you conduct your activity in order to improve profits?

6. Do you have advisors to help you carry out the activity as a business?

7. Have you been successful in making a profit for similar activities in the past?

8. Is the activity going to make profit in the upcoming years? If so, how much?

If you answered "yes" to most of these questions, your hobby may be turning into a business. If so that's great! But you will need to report that income on your 2020 tax return come the 2021 tax season. 

*Info obtained from the IRS newsletter

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