“Q” is for Quilting.  I tried to find a tax term that didn’t start with the word Qualified or Qualifying and there just aren’t any so what the hell  –  let’s make this post about Quilting.  I can’t imagine I’m going out on a limb by saying that quilting is just a hobby for most people.  So what happens when you sell your quilt to a friend?  What happens when you start selling them at art shows?  At what point does a hobby turn into a business?  That can be a tough question to answer.  Essentially it comes down to when does Quilting the Hobby become Qualified Quilting the Business?  For those keeping score at home, yes, I just invented the phrase “Qualified Quilting”.

Qualified quilting is going to involve filing the income and expenses as part of your tax return on a Schedule C.  In order to be a qualified quilting business you need to have a business plan, some profit motive and then keep good records of your income and expenses throughout the year.  Making quilts with $100 of materials and selling them to friends / relatives for $100 does not have a profit motive because a profit is not even possible.  If you are going to be running a quilting business you should consider setting up an LLC, getting a tax ID number, keeping a separate bank account for the business, etc.

So what if quilting is just a hobby?  What do you have to report then?  Hobby income is still income for your tax return, but it is not subject to self-employment taxes because you aren’t employed in a business.  Hobby expenses are allowed only to the extent you have hobby income.  That means your quilting hobby with $200 of income can’t Read More