Hobby or Business?

If you're making money from a hobby, turn your hobby into a business so that you can write off your expenses. You must be able to demonstrate that you engaged in the activity for a profit. To do that, conduct the activity as a business. Keep records, and get a separate bank account for the activity.

The IRS will expect your sideline business to show a profit in three out of five years, or you'll have to prove your profit motivation in order to deduct losses.