Let me start with the necessary disclaimer: I’m not an accountant, and this isn’t tax advice. I’m speaking from the perspective of a gallery owner who has worked with hundreds of artists and seen firsthand how important it is to treat your art like a business—especially when it comes to taxes. If you’re in doubt, talk to a qualified tax professional.
Now, let’s get to the real question: Is your art a business—or just a hobby?
That distinction matters. A lot. In the U.S., the IRS requires you to report all income—whether from a business or a hobby. But here’s the difference: if your art is classified as a hobby, you can’t deduct expenses that exceed your income. You’ll be paying tax on your sales, with no ability to write off studio rent, materials, or travel. On the other hand, if you’re operating as a for-profit business, you can deduct legitimate losses and expenses.
Intent to Profit Matters
The IRS doesn’t ask whether you’re making a living from your art. Instead, they look at whether you’re trying to. Do you have a businesslike approach? Are you tracking income and expenses? Are you adjusting your strategy to improve your bottom line?
The IRS has a 9-point list they use to make this determination (called the “hobby loss rule”) [source: IRS.gov – FS-2008-23]. Key indicators include:
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Keeping detailed records
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Devoting meaningful time to your practice
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Attempting to turn a profit
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Operating in a businesslike way
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Showing occasional or long-term profitability
You don’t need to check every box, but the more of these factors you can demonstrate, the stronger your case.
Track Everything Like It Matters—Because It Does
Good bookkeeping isn’t just about staying organized. It’s one of the best ways to prove to the IRS that you’re serious. That means:
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Separate business and personal accounts
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Save receipts for every deductible expense
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Keep a ledger or spreadsheet of income and costs
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Track mileage, studio use, and professional development
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Document the time you spend working and marketing
If you were ever audited, these habits could make the difference between keeping your deductions—or watching them vanish.
Losses Are Allowed—To a Point
It’s common for artists to have years when expenses outweigh income, especially early on. The IRS gets that. In fact, if you show a profit in at least 3 of the last 5 years, they’ll usually assume you’re running a real business [source: IRS.gov – Publication 535].
But if the red ink keeps flowing, you’ll need to show that you’re making changes to improve—cutting costs, raising prices, trying new marketing strategies, or shifting focus. Passion alone doesn’t make something a business. There has to be a path to profitability.
Your Passion Projects Can Still Be Deductible
Plenty of artists explore new directions or take on experimental work that may not sell right away. That doesn’t automatically make it a hobby. If you’re pursuing new materials, methods, or series with the intention of expanding your practice, that counts as R&D—research and development for your business. Keep records showing how these efforts tie back to your art career, and they may still be deductible.
The Bottom Line
It’s perfectly fine to enjoy your work—in fact, the IRS acknowledges that many business owners love what they do. But if you want the tax benefits of being a professional artist, you need to act like one. Track your finances. Set goals. Keep records. Think in terms of profit.
And again—if you’re not sure how to proceed, talk to a tax professional who understands the unique challenges of working artists.
You can do this. You can be both creative and financially sound. Just don’t leave it to chance—or to the IRS’s interpretation.
Thank you Jason,
This is such a good reminder to get set up in the beginning of the art business enterprise. Doing it correctly from the start is additional work no doubt about it but it easier than trying to backtrack for the information that is needed to establish your art business foundation.
Starting with the right systems in place does take some work up front, but as you said, it’s far easier than trying to backtrack later. Good foundations pay dividends for years to come. Thanks Pauline!
Hi Jason,
Thanks so much for clarifying this important subject! I’ve heard about these tax issues in general terms recently, but I was never sure what specific steps an artist needs to take in order to prove “business intent”, especially when sales are slow. Your lists and comments are very helpful!
I’m glad the list of steps was helpful. Proving business intent can feel murky, especially in slower sales periods, but having those concrete actions in place can make a big difference if questions ever come up.
Thank you Jason, This is so spot on. It sometimes feels like I have two heads that want to go spearate ways. I can attest to the fact that sometimes, the oath to sales and profitability is long and dry. Further to the point, when one decides they are an artist and steps into that “pond”, the former habits and notions accompanying the past “art on the side” have to go. Sooner rather that later is best. Trust me, “later” is costly even with Jason’s wisdom and guidance.
There are a lot of rexources and prograns out there to make the business side of your art career work.
You make an important point about letting go of “art on the side” habits once you commit to being a professional artist, Stephen. That mindset shift is huge—and yes, the sooner it happens, the better. I appreciate you sharing your perspective.
thanks Jason. My accountant and I sat down and lined out some goals to make my business more profitable. She suggested almost everything you stated above. Always a good reminder to keep up the research and keep your bookkeeping straight, and above all, have a good tax accountant.
It sounds like you and your accountant are a great team, Geraldine! Having clear goals, accurate bookkeeping, and solid tax advice really does make the rest of the business run smoother. Glad the article reinforced what you’re already putting into practice.
Thanks so much for this Jason. In my situation, my health holds me back and I feel unpredictable. Although I have a stash of well over 50 paintings on hand, and have won several awards, I never know what I can produce in the next months. This holds me back from building a business or trying to get into galleries. I’ve made a few sales each year. Can’t wrap my head around setting up a website. That should be simple, right? As with many of your other articles, I’ll save this to refer to when I need it. Thank you
Thank you for sharing your perspective, Eileen. Even with unpredictable production, having a body of work ready is a big advantage. A simple website can help get that work in front of more collectors when the timing feels right.
After years of being. sole proprietor my tax accountant told me I needed to become an LLC which I did. It includes more business demands in a sense, I now do quarterly payroll taxes which I never had to do as a sole proprietor, but I also found that overall it is a benefit tax wise. I don’t think everybody should do it but talk to your tax person and see if it makes financial sense for you.
Solid advice—talking with your tax professional is the key. Chris, your example of transitioning to an LLC is a good reminder that while the extra administrative work can feel heavy, the benefits are often worth it.