You Sold $40 of Crafts. Are You Self-Employed Now?

You made something, someone paid you for it, and a small worry showed up with the money: does this mean I am a business now, and do I owe taxes? It is a fair question, and it usually arrives after a tiny first sale, which makes it feel out of proportion to the amount involved. You sold $40 of candles or prints or baked goods, and suddenly you are wondering if the tax authority wants a piece of it.

The honest, calming answer is that yes, selling things you make can count as self-employment income, but small numbers almost always mean small or no tax, and the rules are far less frightening than the question feels. Let us walk through it plainly, with the actual thresholds, so you can stop guessing and get back to the part you enjoy.

First, the honesty line that belongs on anything about tax numbers: this is general guidance, not tax advice. The thresholds below are real, but how they apply to you depends on your full situation. Confirm with an accountant before you file.

The short version

If you sell things with the intention of making money, the income is generally taxable, and that is true whether you call it a side hustle, a shop, or just a thing you do on weekends. What changes with the amount is not whether it counts, but how much (if any) tax you actually owe and what you are required to file. At $40, the practical answer for most people is: report it if it is part of an ongoing effort to earn, keep your receipts, and do not lose sleep.

The thing that turns this from a worry into a non-event is simple record-keeping. If you have your costs captured (the materials, the supplies, the platform fees), your taxable profit is your sales minus those costs, and on a tiny operation that profit is often tiny too. The receipts are what protect you, which is why setting them up early matters even when the sales are small. More on that at the end.

Hobby or business?

People reach for the word "hobby" hoping it means tax-free, and it is worth being clear about what it does and does not mean. Broadly, the distinction is about intent and pattern: are you doing this in an ongoing, businesslike way with the aim of making a profit, or is it a personal pursuit that happens to bring in the odd dollar? An activity run to make money looks like a business for tax purposes, even a very small one.

The reason this matters: if it is a business, you report the income and you can also count the costs of earning it against that income. So "I am a business" is not only an obligation, it is also the door to deducting your expenses. The label is not a punishment. It is the framework that lets your $40 in sales be offset by the $25 in materials you bought to make the thing.

The US thresholds, plainly

Two numbers do most of the work for a US seller, and both come from the IRS.

The first is the self-employment tax filing trigger. If your net earnings from self-employment are $400 or more in the year, you are required to file and pay self-employment tax on them. Self-employment tax is 15.3% (12.4% Social Security plus 2.9% Medicare), applied to 92.35% of your net earnings. Source: IRS Topic 554. Net earnings means after your business costs, which is exactly why keeping receipts matters: your materials and fees reduce the number this threshold is measured against.

The second is the estimated-tax threshold. You are generally required to pay estimated tax during the year only if you expect to owe $1,000 or more for the year after withholding. Source: IRS 2026 Form 1040-ES. Below that, you are not making quarterly payments, you are simply settling up when you file.

So at $40 of sales, with materials that cost you something, your net is small, likely well under the $400 SE-tax trigger, and nowhere near the $1,000 estimated-tax mark. The income is still reportable if this is an ongoing effort to earn, but the tax owed is small or zero. The worry was bigger than the bill.

The Canada reality, plainly

Canada works differently, and the difference catches people off guard, so here it is straight.

In Canada, all self-employment income is reportable no matter how small, on form T2125, whether or not you are registered for anything. There is no $400-style floor below which you can ignore it. Source: CRA T2125 guidance. That sounds stricter, and on reporting it is, but reporting income is not the same as owing a lot of tax. Just like the US case, your deductible costs reduce the profit you are taxed on, so small sales with real costs produce small taxable profit.

The number Canadians often confuse with a tax threshold is the $30,000 GST/HST small-supplier line. You are only required to register for and charge GST/HST once your total taxable sales exceed $30,000 in a single calendar quarter or over four consecutive quarters. Source: CRA, when to register and charge GST/HST. Below $30,000, registration is optional. So at $40, you report the income on your return, and GST/HST is simply not in the picture.

What this means at $40

Put together, here is the calm summary for a tiny first sale:

• Selling things you make to earn money is generally taxable income in both countries.
• In the US, you file and pay SE tax once net earnings hit $400, and you make estimated payments only if you expect to owe $1,000 or more for the year.
• In Canada, you report all of it, but GST/HST registration is not required until $30,000.
• Your costs reduce your taxable profit, so small sales with real materials often mean little or no tax.
• The thing that protects you, in either country, is keeping the receipts for what you spent.

That last point is the whole reason this is manageable. The difference between a stressful tax season and a five-minute one is whether your costs were captured as you went. If you want to see whether you have crossed into territory worth setting up properly, the side hustle starter walks you through it for your own situation.

Frequently asked questions

Do I owe taxes if I only sold $40 of crafts? Selling things you make to earn money is generally taxable, but $40 with real material costs leaves a tiny profit, so the tax owed is usually small or zero. In the US, you do not even hit the self-employment tax filing trigger until net earnings reach $400. This is general guidance, not tax advice, so confirm your own case with an accountant.

Am I officially self-employed now? If you are selling in an ongoing, businesslike way with the aim of making money, the income is treated as self-employment income for tax purposes, even at small amounts. The upside is that being a business also lets you deduct the costs of earning that income against it.

What is the income limit before I have to do anything in the US? Net self-employment earnings of $400 or more trigger a filing and self-employment tax requirement, and you generally make estimated payments only if you expect to owe $1,000 or more for the year. Source: IRS Topic 554 and the 2026 Form 1040-ES.

Do I have to report tiny craft sales in Canada? Yes. Canada requires all self-employment income to be reported on form T2125, no matter how small. Source: CRA. The $30,000 figure people hear about is only the GST/HST registration threshold, not a point below which income is tax-free.

How do I keep this simple while the sales are small? Capture your costs from the start. Snap or forward every receipt for materials, supplies, and fees, so your deductible costs are recorded and your taxable profit stays accurate. Setting up receipts before your first sale shows the day-one habit, and the deductions to look for covers what counts.

Your next step

The honest takeaway: a $40 sale does not put you in trouble. It just means it is worth keeping your records from here on, so that if this grows into something real, your numbers are already clean.

Start by running the side hustle starter to see what actually applies to you, then capture the receipts for whatever you bought to make those first sales, the materials, the supplies, the platform fees, so your deductible costs are protected.

scan-ai is free to begin: 20 receipt scans and 5 AI chats, no credit card. Snap or forward your next receipt at scan-ai.ca, and let your small hustle's records build themselves while it is still small.

This article is general information, not tax advice. Tax rules change and depend on your specific situation. Any tax categorization mentioned here is illustrative. Confirm anything with real stakes with a qualified accountant or tax professional.