Do I need Schedule C for selling handmade crafts as a hobby on eBay and Facebook Marketplace?

You've got the basics right, but there are some important nuances to understand about hobby income versus business income. If you're truly operating as a hobby (not trying to make a profit), you would report the income on Schedule 1, Line 8 as "Other Income." However, the IRS looks at several factors to determine if your activity is a hobby or a business - including whether you depend on the income, operate in a businesslike manner, or expect to make a profit. Unfortunately, hobby expenses are no longer deductible as of the 2018 tax law changes. This means you'll pay tax on the gross amount you receive, not your net profit after materials. Getting 1099 forms doesn't automatically make your activity a business, but it does mean the IRS is being informed of your income. You'll need to report the full amount shown on those forms. If you receive 1099s from both eBay and PayPal for the same transactions, you'll need to be careful not to double-report the income. Given the cost of materials for handmade items, you might actually benefit from treating this as a business (Schedule C) so you can deduct those expenses, even if it means a bit more paperwork.

I recently went through this exact situation with my woodworking side gig! After trying to figure it out myself and getting nowhere, I used https://taxr.ai to analyze my situation. It was super helpful - I uploaded my Etsy and PayPal statements, and it identified exactly which parts of my craft sales qualified as business vs hobby. The tool showed me that even though I was treating my woodworking as a hobby, I was actually operating with a profit motive in ways I hadn't realized. It analyzed my sales patterns and expenses and determined I'd be leaving money on the table by not filing Schedule C. The best part was that it explained everything in normal-person language instead of confusing tax jargon. Saved me from overpaying by a decent amount since I could deduct my expensive woodworking tools and materials.

Update on my tax situation after using taxr.ai: I'm genuinely surprised at how helpful it was. I was ready to just report my crochet sales as hobby income, but after running my numbers through the tool, I realized I was leaving hundreds of dollars on the table. The analysis showed that based on my sales frequency (2-3 items per week) and my pricing structure (materials + hourly rate markup), I was actually operating with a business mindset even though I considered it "just a hobby." The tool created a detailed breakdown of which expenses I could legitimately deduct - including partial internet, specialized lighting for photography, and even percentage of my phone bill used for customer communications. It even flagged some potential audit triggers I hadn't considered, like inconsistencies between my PayPal and Etsy reports. Definitely filing Schedule C now - the material deductions alone make it worthwhile!

If you're struggling to get answers from the IRS about whether your craft sales count as a business or hobby, I feel your pain! I spent WEEKS trying to reach someone on the phone. After multiple failed attempts, I found https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c. I was honestly dubious that it would work, but within 45 minutes I was actually talking to a real IRS agent who walked me through the exact requirements for distinguishing between hobby and business income. They confirmed that I needed to file Schedule C for my pottery sales since I was actively trying to make a profit, even though it wasn't my main source of income. The agent also explained exactly what documentation I needed to keep to substantiate my material costs and other business expenses. Saved me so much confusion and potential errors on my return!

I need to eat my words about Claimyr. After my skeptical comment, I decided to try it anyway out of desperation regarding my candle business tax questions. I'm shocked to report that after MONTHS of failing to reach anyone at the IRS, I was connected with an agent within an hour of using the service. The agent walked me through the exact documentation requirements for my situation and confirmed that since I'm consistently trying to make a profit (even though I haven't succeeded yet), I should be filing Schedule C. The agent also explained that I needed to be careful about mixing personal and business purchases of supplies - apparently that's a red flag. She recommended keeping separate receipts for materials used in products I sell versus gifts I make for family. This literally saved me from making a costly mistake on my taxes. I was ready to just report everything as hobby income and lose all my deductions!

I think everyone is overlooking a key detail here - PayPal and eBay may not even send 1099s depending on how many transactions you have and the total amount. For 2023 taxes (filing in 2024), they only send 1099-Ks if you exceed $20,000 AND 200 transactions. Starting with 2024 taxes (filing in 2025), the threshold was supposed to drop to $600 with no transaction minimum, but there have been delays implementing this. Worth checking the current status before worrying too much about 1099s. Regardless of whether you get a 1099 though, you're still legally required to report the income!

I've been selling my handmade jewelry as a "hobby" for years and ended up getting audited because I was inconsistent in how I reported it. Here's what I learned the hard way: If you're making things with the intent to sell them, even occasionally, and you're trying to make money (not just recover material costs), the IRS will likely consider it a business. The "hobby vs business" distinction matters MUCH more after the 2018 tax law changes eliminated hobby expense deductions. Now if it's a hobby, you pay tax on ALL income with NO deductions for materials. My advice: if you're regularly creating items specifically to sell them (vs. occasionally selling things you made for fun), just treat it as a business from the start. Keep good records, deduct legitimate expenses, and pay the self-employment tax. It's actually cheaper in most cases than paying income tax on the gross sales amount with no deductions.

Great question! The hobby vs. business distinction can be really tricky, especially for craft sales. Based on what you've described - creating handmade items specifically to sell on eBay and Facebook Marketplace - you might actually benefit from treating this as a business even at $1,300/year. Here's why: if you report it as hobby income, you'll pay tax on the full $1,300 with zero deductions for your materials (paints, canvas, fabric, etc.). But if you file Schedule C, you can deduct all those material costs plus other legitimate business expenses like packaging supplies, listing fees, or even a portion of your internet if you use it for business communications. The self-employment tax on Schedule C might seem scary, but it's only 15.3% of your NET profit (after expenses). If your materials cost $600-800, you'd only pay SE tax on $500-700 instead of income tax on the full $1,300. Regarding 1099s - you're required to report the income whether you get forms or not. If you do get them from both eBay and PayPal, just make sure not to double-count the same transactions. My suggestion: keep detailed records of all your craft-related expenses and consider Schedule C. The paperwork is manageable and you'll likely save money compared to the hobby route.