Absolutely. It may have started out as a hobby but you're treating it as a business now. This year your business lost money. Next year maybe it will make money. Keep trying!
If it doesn't make money after three years, though, then it is a hobby. At that point the income is taxable but you can't deduct the expenses. So it will probably be time to shut down the Etsy shop.
@Avaldez1393
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