Can I deduct my craft fair expenses on my taxes?

You spend money on booth fees, supplies, and travel, but you are not sure what counts as a deductible expense. It is easy to lose track after a busy season.

The IRS uses a set of guidelines to determine whether an activity is carried on for profit (a business) or for recreation (a hobby). While a common rule of thumb involves making a profit in three out of five consecutive years, the IRS actually considers a variety of factors to determine intent. If an activity is classified as a hobby, tax regulations often significantly restrict the ability to deduct expenses. Maintaining detailed financial records is one way vendors demonstrate a “profit motive.” For a definitive determination, vendors may want to review the IRS “Hobby Loss” rules or consult a tax advisor.

Create a simple expense log with categories like supplies, travel, and fees, and attach a receipt or digital copy for each purchase. Reconcile expenses after every event so nothing is missed. When tax time comes, you can provide organized totals to a tax professional or transfer them directly into your filing.