Hobby Income and Expenses - clarification needed

[peadles1998]

"Beginning in 2018, the IRS doesn't allow you to deduct hobby expenses from hobby income, you must claim all hobby income and are not permitted to reduce that income by any expenses."

Above wording comes from this article: https://turbotax.intuit.com/tax-tips/self-employment-taxes/4-tax-tips-for-money-making-hobbies/L89qz...

What is the definition of "income" as used in the quotation above? Is it gross receipts, gross profit, or something else? Lets use the below circumstance to get into the numbers:

I do woodworking as a hobby. I build a birdhouse and sell it for $25. The wood, glue and paint used to make it cost me $15. I also needed to use my tools and shop which incurred some wear and tear. The sale involves communication over my cell phone and use of my data plan which have monthly fees. I am married filing jointly and take the standard deduction. What is the proper way and correct amounts to report on my tax return?

[Bsch4477]

See below. $10.00 seems correct. 

[AmeliesUncle]

You would report $10 of hobby income.

You are allowed to subtract the "cost of goods sold", but not other expenses.  From Publication 535:

You can determine gross income from any not-for-profit activity by subtracting the cost of goods sold from your gross receipts. However, if you determine gross income by subtracting cost of goods sold from gross receipts, you must do so consistently, and in a manner that follows generally accepted methods of accounting.

https://www.irs.gov/publications/p535#en_US_2020_publink10004353

https://www.law.cornell.edu/cfr/text/26/1.183-1#e

[Rick19744 · Accepted solution]

In general, I agree with @Bsch4477 in that most expenses incurred in a hobby are not deductible as they are typically defined as itemized deductions.  This became effective beginning in 2018.

However, Publication 535 page 7 states the following:

You can determine gross income from any not-for-profit activity by subtracting the cost of goods sold from your gross receipts. However, if you determine gross income by subtracting cost of goods sold from gross receipts, you must do so consistently, and in a manner that follows generally accepted methods of accounting.

As a result, you can report your sales income less your CGS on Schedule 1 line 8i.

Make sure you maintain meticulous records, as should you be audited, the IRS will definitely focus on this issue.

Since this forum is limited in the ability to gain insight into your activity, being able to provide much more assistance will be beyond the scope of this forum.

Edit: Not sure why @AmeliesUncle reply was not showing up when I responded, but we do reach the same conclusion.