If you decide to claim the 2024 income as hobby income, then you will not be able to claim any expenses against the income.
If you plan to continue to operate the business with an intent to make money and you have a profit during 2025, then you would go back to reporting the income and expenses on Schedule C. However, you could not recover any of the expenses lost in 2024 by claiming the income as a hobby.
Take a look at the following TurboTax article to learn more about hobby income versus business income. This may help to clarify the situation for you. Keep in mind that there is no strict guideline for how much of a loss is too much, or how much of a profit is not enough. If the numbers are large enough that the losses are offsetting a big percentage of your other income, then it would appear more questionable by the IRS that you had a hobby and not a business.
When the IRS Classifies Your Business as a Hobby
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