Report extra income on your taxes

HOW AND WHEN TO REPORT IT

• If you made a profit: You need to pay self-employment tax if your earnings exceeded your expenses. Calculate what you owe on Schedule SE and report it on your 1040.
• If you lost money: It’s worth adding up your business expenses if they exceeded what you earned. In order to claim a loss, thereby lowering your AGI, you must itemize your expenses on Schedule C.

DEDUCT YOUR BUSINESS-RELATED EXPENSES

• Car: Claim the portion of vehicle expenses that relate to business use only.
• Home office: Calculate the percentage of square footage that is devoted to work and deduct that
  portion of your mortgage or rent.
• Phones and utilities: Claim the portion of these bills that applies to business purposes.
• Materials: Deduct the cost of supplies you bought that were used to create your product or conduct your business.
• Office: These expenses include paper, printer and computer supplies, as well as mailing or shipping.
• Marketing and education: Any money you spent furthering your career or advertising your services is reimbursable. 

For more qualifying business expenses, check Publication 535, “Business Expenses,” at irs.gov/publications/p535.