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I’m trying to figure out if my side gig selling handmade crafts online qualifies as a legitimate business for tax purposes, or if the IRS will see it as a hobby. I made about $3,500 last year, but after materials and marketplace fees, my net profit was minimal. I’m unsure if I should be filing a Schedule C or just reporting the income elsewhere.

Sounds like you’re running it like a small business even if the profit is slim. If you’re regularly selling, tracking expenses, and treating it like a business, the IRS would likely want you on Schedule C and maybe Schedule SE for self-employment tax if your net earnings hit $400. If it’s just a casual activity, you’d report the income on your Form 1040 and you wouldn’t get to deduct those costs.

I had a similar setup last year. I kept receipts and tried to keep a separate bank account, and I ended up filing Schedule C because I had some modest net profit. It wasn’t glamorous; I still had to pay a bit of self-employment tax, and I realized I could deduct shipping and materials. It felt messy at first.

Sometimes I wonder whether the thing is really about profit or just enjoyment. If the numbers stay tiny but you keep reinvesting, the tax code will still see it as income even if you lose money. The bigger question is whether you’re documenting the activity like a business, not just an excuse to sell a few items.

Do you have any records showing you intended to make a profit, like a basic plan, pricing strategy, or regular posting schedule?

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