Hobby Income and Hobby Losses: What to Report
Published November 6, 2026
Many people sell crafts, collect items, or earn money from a pastime. Some of that money is taxable, even when the activity never felt like a job. This guide explains what the IRS says about income from a hobby, the limits on hobby expenses, and where to start when you are not sure whether an activity is a hobby or a business. It is general information. It is not advice about your return.
What the IRS calls a hobby
Publication 525 says a hobby is an activity from which you do not expect to make a profit. The IRS calls this an activity not for profit. Publication 525 gives an example: a hobby, or a farm you operate mostly for recreation and pleasure. Publication 334 says activities you do as a hobby, or mainly for sport or recreation, fall under a special limit on deductions.
Hobby income is taxable
You must include income from an activity not for profit on your return, even if you did not expect to make a profit. Publication 525 says to enter this income on Schedule 1 (Form 1040), line 8j.
Selling items from a collection can also be taxable. Publication 525 has a caution for people who collect stamps, coins, or other items as a hobby. If you sell any of those items for more than you paid, your gain is taxable as a capital gain. If you sell items from your collection at a loss, you cannot deduct the loss.
Hobby expenses have limits
Publication 525 says deductions for expenses related to the activity are limited. They cannot total more than the income you report from the activity. They can be taken only if you itemize deductions on Schedule A (Form 1040). The same publication says losses from a hobby are not deductible from other income.
Here is a made-up example. You earn $500 from a hobby and spend $800 on it. Your expense deductions can total no more than $500, and only if you itemize. The extra $300 cannot reduce your wages or other income.
Reporting steps
Work in this order. First, add up all the money you received from the activity during the year, and enter that income on Schedule 1 (Form 1040), line 8j. Second, add up the expenses you paid for the activity. Third, if you itemize, the deductions for those expenses cannot be more than the income. Any excess is not a loss you can use against other income.
Hobby or business?
The question is whether the activity is carried on to make a profit. Publication 334 points readers to an IRS.gov newsroom article on hobby or business for more detail. If the activity is a business you run to make a profit, it is reported on Schedule C instead. Our guide, Schedule C: business income and expenses basics, explains that form.
Summary
The main points are short. Hobby income is taxable. You enter it on Schedule 1 (Form 1040), line 8j. Hobby expenses can only reduce that income, and only if you itemize on Schedule A. A hobby loss cannot offset your wages or other income. If the activity is a business carried on to make a profit, Schedule C applies instead.
Keep records
Keep records of the money you receive from the activity and the expenses you pay for it. Good records make it easier to answer the profit question. They also support any expense you report.
Where to go next
If you itemize, read our guide to the standard deduction or itemizing. It explains when Schedule A can make sense. If you also have other business income, read about gig work and Form 1099-NEC income, which covers income reported to you on a form.
Upload your documents and answer a few simple questions. Your preparer reviews every deduction and credit and lets you know when your return is ready to sign.
Sources: Sources: IRS, Publication 525 (2025), Taxable and Nontaxable Income, Activity not for profit and Hobby losses (https://www.irs.gov/pub/irs-pdf/p525.pdf); IRS, Publication 334 (2025), Tax Guide for Small Business, Activities Not Engaged in for Profit (https://www.irs.gov/pub/irs-pdf/p334.pdf) This is general information, not advice about your specific return.
