I know they say you can only claim business losses up to 3 years after which it’s considered a hobby so you can’t write off any losses. Do I still need to report this on my taxes or should I just leave it off? I live in Illinois.
not quite correct. you have to determine whether or not you are engaging in this activity for profit. if so, then you continue to deduct the losses. At some point the IRS might audit you. Then you would need to prove there was a profit motive. if you self-determine you're engaged in a hobby, your prior returns are probably wrong. the hobby income would be taxable, but expenses wouldn't be deductible. Also, for the current and future years any income would have to be reported and taxed (schedule 1 line 8j per 2023 forms).
you can file with the IRS form 5213 to delay determination of profit motive until the 5th taxable year.
https://www.irs.gov/pub/irs-pdf/f5213.pdf
it may be best to discuss your situation with a tax pro.
not quite correct. you have to determine whether or not you are engaging in this activity for profit. if so, then you continue to deduct the losses. At some point the IRS might audit you. Then you would need to prove there was a profit motive. if you self-determine you're engaged in a hobby, your prior returns are probably wrong. the hobby income would be taxable, but expenses wouldn't be deductible. Also, for the current and future years any income would have to be reported and taxed (schedule 1 line 8j per 2023 forms).
you can file with the IRS form 5213 to delay determination of profit motive until the 5th taxable year.
https://www.irs.gov/pub/irs-pdf/f5213.pdf
it may be best to discuss your situation with a tax pro.