At this point, you might be asking yourself, “Does it really matter if the IRS treats me like a hobby or a business?” Yes, yes it does.
As a business, you can deduct all ordinary and necessary expenses incurred from conducting your business. An ordinary expense is common and accepted in your trade or business. A necessary expense is appropriate for the business.
As a hobby, you can generally only deduct expenses up to the amount of income your hobby brought in. So, for example, if you bought $1,500 worth of equipment for your hobby, then only sold two things at $50 apiece, you could only deduct $100.
That also means that, if your activity is treated as a hobby, you can’t deduct a loss from the hobby from other income.
So, if you want the IRS to treat you as a business, make sure you’re trying to turn a profit.