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Hobby income refers to the money that is earned from a hobby or leisure activity, rather than a full-time business. While hobbies can be enjoyable and fulfilling in their own right, some individuals may also generate income from them through the sale of products or services.

The Internal Revenue Service (IRS) considers hobby income to be taxable, just like any other form of income. However, the treatment of hobby income can be somewhat different from that of business income, as the IRS may view a hobby as a non-business activity that is undertaken primarily for personal enjoyment, rather than for the purpose of making a profit.

One of the key differences between hobby income and business income is that expenses related to a hobby are generally not tax-deductible. In contrast, business expenses are typically tax-deductible, as they are incurred in the course of running a business. This means that, while individuals who earn hobby income must report and pay taxes on that income, they cannot offset their hobby-related expenses against it in the same way that business owners can.

There are several factors that the IRS may consider when determining whether an activity is a hobby or a business, including the level of profit-seeking activity, the time and effort spent on the activity, and the individual's level of expertise in the field. If the IRS determines that an activity is a hobby, rather than a business, it may disallow deductions related to that activity and require the individual to pay taxes on the income earned from it.

There have been several notable court cases involving hobby income, including Commissioner v. Groetzinger, which was heard by the United States Supreme Court in 1987. In this case, the taxpayer, who was a professional golfer, argued that his golfing activities constituted a business, rather than a hobby, and that he was therefore entitled to claim deductions related to those activities. The court ultimately ruled in favor of the taxpayer, finding that his golfing activities constituted a business, rather than a hobby, and that he was entitled to claim deductions related to those activities.

In summary, hobby income is taxable, just like any other form of income. However, expenses related to a hobby are generally not tax-deductible, and the IRS may view a hobby as a non-business activity that is undertaken primarily for personal enjoyment, rather than for the purpose of making a profit. If you are earning income from a hobby, it is important to understand your tax obligations and to accurately report and pay taxes on that income.