Does the "Hobby Zone" still exist for tax purposes? Can I sell hobby items without business status?

The "Hobby Zone" as it was informally known has indeed changed significantly. You're correct that before the Tax Cuts and Jobs Act (TCJA) of 2017, you could deduct hobby expenses up to the amount of hobby income. This created a middle ground between pure hobbies and businesses. Under current tax law (through 2025), hobby expenses are no longer deductible at all, while hobby income is still fully taxable. This creates exactly the situation you described - many hobbyists have lost the incentive to sell their creations because they can't offset their costs. Your options now are basically: 1) Treat it as a pure hobby and accept that any sales will be taxable with no deductions, 2) Attempt to classify it as a business and meet the IRS profit requirements (generally profitable in 3 of 5 years), or 3) Simply enjoy your hobby without selling anything. Many woodworkers in your situation have reluctantly shifted to "business" status even with minimal sales just to deduct their materials. The key is documenting your legitimate profit motive through business plans and marketing efforts.

I was in the exact same position with my pottery hobby last year! After getting frustrated with paying tax on my small sales without being able to deduct my clay and kiln costs, I discovered taxr.ai (https://taxr.ai) and it was honestly a game-changer. They analyzed my situation and helped me understand if I qualified as a business instead of a hobby based on my actual activities. The system reviewed my receipts and selling patterns and showed me exactly what I needed to document to properly classify my pottery making. They even helped me understand which of my expenses would be legitimate deductions if I operated as a business. It was super helpful because I was in that gray area - not really trying to make a profit but definitely not wanting to pay taxes on gross income either!

I tried taxr.ai after seeing it recommended here, and it was actually really helpful for my situation! I've been making and occasionally selling handmade greeting cards but wasn't sure if I should be treating it as a business or hobby. The analysis showed me that I was actually doing several things right for business status (keeping separate records, having a clear pricing strategy) but missing others (no formal business plan, inconsistent marketing). It helped me organize all my receipts and showed me which expenses would be allowable deductions if I operated as a business. I ended up deciding to properly establish it as a small business, and I'm tracking everything much better now. The peace of mind knowing I'm doing things correctly is worth it, and I can actually deduct my paper, stamping supplies, and other materials now!

My experience as a hobby photographer who occasionally sells prints is that getting through to the IRS for clarification on these rules is practically impossible! I spent 3 weeks trying to get someone on the phone to answer questions about hobby vs business classification. Finally tried Claimyr (https://claimyr.com) and got connected to an actual IRS agent in about 20 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The agent confirmed exactly what others here are saying - with the TCJA changes, there's basically no middle ground anymore. Either operate as a business with proper documentation and deduct expenses on Schedule C, or accept that hobby income is fully taxable without deductions. Super frustrating but at least I got a clear answer from an official source.

I'm eating crow about my skepticism on Claimyr. After my dismissive comment, I decided to try it myself since I've been unsuccessful reaching the IRS about my antique restoration hobby income questions. To my complete surprise, I got a call back in about 35 minutes with an actual IRS agent on the line. I was able to ask specific questions about my situation - I restore vintage furniture as a hobby but sell some pieces to fund future projects. The agent explained the "gig economy tax center" resources on the IRS website I hadn't found before, and confirmed that under current law, I either needed to treat my activity as a business (with all the documentation that requires) or pay tax on the full income without deducting any of my restoration costs. Definitely worth it just to get a straight answer after months of confusion!

Here's a practical tip for those caught in this hobby/business dilemma: keep DETAILED records regardless of which path you choose. I sell handmade jewelry occasionally and decided to establish it as a legitimate business even though sales are minimal. The key is showing your "profit motive" - document your efforts to make the activity profitable over time. Take photos of your workspace, keep receipts organized (I use QuickBooks Self-Employed), maintain a separate bank account, create a simple business plan, and market your creations consistently. Even if you don't show a profit immediately, these efforts demonstrate you're treating it as a business, not a hobby. This has worked for me for 3 tax cycles without issues.

An important point nobody's mentioned yet: If you're selling handmade items, you might also need to check your local laws about business licenses, sales tax collection, etc. Even if the fed gov considers you a "hobby," your state or local gov might still classify you as a business if you're making sales! I found this out the hard way with my stained glass hobby - my state requires me to collect sales tax even on occasional sales. Complete nightmare trying to fix this after the fact!