Definition
Money from an activity you do mainly for fun rather than to make a profit; it must still be reported, but a hobby loss cannot reduce other income.
What it means
The IRS separates a hobby, done mainly for pleasure, from a business, run to make a profit. Income from a hobby must still be reported on your return, on Schedule 1 of Form 1040. Unlike a business, a hobby cannot produce a loss that offsets other income. To decide, the IRS looks at factors such as whether you run the activity like a business with complete records, change methods to improve profits, depend on the income, spend time and effort on it, have made or expect a profit, and whether losses are beyond your control or normal for a start-up. Many creators begin as a hobby and become a business; once it is a business, income and expenses go on Schedule C.
Example
Someone who sells a few of their paintings online each year for fun, without trying to build a business, reports the sales as hobby income.
Illustrative numbers only. Your situation will differ.