Taxable Website Ad Revenue
I'm not a tax advisor, but I've done freelance work, so... If any of your side-business revenue is reported on a 1099, you're now a business owner, which is why Schedule C must be filled out. As a business owner, minimum wage doesn't apply to you. All revenue is income to you, and you owe taxes on the profit, after subtracting legitimate (verifiable) business expenses. You'll want to talk to a real tax advisor if you're going to start expensing mileage, part of your house (if you use a home office), etc. Don't forget that you'll owe self-employment tax (the employer's half of your payroll tax).  You can't save money on business taxes by paying yourself a wage and then counting it as an expense to the business. You'll definitely want to talk to a tax expert if you start playing around with finances as an (the) owner of the business. Income that is not reported on a 1099 should be reported as hobby income. If the $5000 is income, then you need to pay income taxes on it.  That's simply the way it works.  Hourly rate has nothing to do with whether or not you pay taxes. If it helps, try to think of the $5000 as the first $5000 you make for the year.  Now it's covered by your standard deduction and you're not paying taxes on it.
Yes, Paypal has such a button you can use, but to be clear, the money you receive is taxable income. Your website is providing 'value' to the readers, and while they may feel they are making a gift to you, it's earned income as far as the IRS is concerned.  (This assumes you are in the US, you may wish to add a tag to indicate your country) You can always reduce the income by the direct expenses required to earn it, and figure out whether it is ultimately a net profit or loss.   The net profit is taxable income.  The loss may be tax deductible if the underlying thing is tax deductible.    For the book, the $50 revenue required a $100 expense, so that's a $50 net loss.  You don't owe any income tax since it's a loss.  You could take the loss as a tax deduction if you have a business trading books, or if buying the book would be tax deductible for some reason.  Note that in the latter case you can only deduct the $50 not the $100.  For the airline ticket, it is to compensate you for the losses you took as a result if the delayed flight. So you tally up the $22 meal you had in the airport waiting for news, the $110 on the motel room you rented or forfeited, any other way you can peg a cash value to any losses you took.  Total them up, again, a net loss is only deductible if the travel is already deductible. Note that if the actual expenses (book, flight) were tax deductible for some reason, the cash-back reduces the amount of your tax deduction, so it has the same effect as the sale/gift being taxable income. You may want to dive into the various scandals and further hefty settlements between blue chip brands and agency networks here. Ask around if Dentsu Aegie finances enjoyed being honest to their clients as to where the money was going and what kind of online advertising was actually in place, just to name a specific example.  Of course online ads find positive outcomes for lots of businesses. You don’t expect any less when you see Google revenues to be honest. It still doesn’t mean that the whole tracking and private information dragging framework isn’t wrong or that so many web experiences aren’t soiled by intrusive and nasty ads. On the revenue only. This amount of 10$ will be considered as interest and fully taxable. It will not be a capital gain. But why would you decide to declare it as an income? 100$ is insignificant. If you lend small amount to friends it cannot be considered a lending business. Form 1099-misc reports PAYMENTS, not earnings.  This does not imply the EARNINGS are not taxable in the year they were earned. Generally, an activity qualifies as a business if it is carried on with the reasonable expectation of earning a profit. In order to make this determination, taxpayers should consider the following factors: The IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year — at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses. From the IRS document FS-2007-18. The entire text can be found here: http://www.irs.gov/newsroom/article/0,,id=169490,00.html "VAT = Value Added Tax (as an Aussie think ""GST"") This is applicable in Britain. Basically, if you were in Britain, and if you could claim VAT as a deduction, that invoice is not sufficient proof to make the claim. But you're in Oz so it doesn't apply to you in any case. For work-related deductions like book purchases, see http://www.ato.gov.au/individuals/content.asp?doc=/content/00216829.htm&pc=001/002/068/001/002&mnu=&mfp=&st=&cy=1  Issues such as the books being second hand or purchased online are not cited in the instructions as relevant/limiting factors. In fact, if you really want to get into the nitty gritty, you could claim the work-related proportion of your internet access fees as a deduction (question D5 instructions, above, cover that as well)." "The relevant IRS publication is 526, Charitable Contributions. The section titled ""Contributions you cannot deduct"" begins on page 6; item 4 reads: ""The value of your time or services."" I read that to mean that, if the website you built were a product, you could deduct its value. I don't understand the legal distinction between goods and services I originally said that I believe that a website is considered a service. Whether a website is a service or a product appears to be much more controversial that I originally thought. I cannot find a clear answer. I'm told that the IRS has a phone number you can call for rulings on this type of question. I've never had to use it, so I don't know how helpful it is. The best I can come up with is the Instructions for Form 1120s, the table titled ""Principal Business Activity Codes,"" starting on page 39. That table suggests to me that the IRS defines things based on what type of business you are in. Everything I can find in that table that a website could plausibly fall under has the word ""service"" in its name. I don't really feel like that's a definitive answer, though.  Almost as an afterthought, if you were able to deduct the value of the website, you would have to subtract off whatever the value of the advertisement is. You said that it's not much, but there's probably a simple way of estimating that."