The
answer depends on whether you develop apps with the primary
intention to make money, or if you basically make apps for enjoyment.
If you develop apps to make money (ie: you have a profit motive), you report your income and expenses on Schedule C. If you have profit of over $400, you must also
complete Schedule SE and pay the resultant self-employment tax in addition to
income tax. If you have a loss, the loss is deductible against any other income
you may have.
If you develop apps primarily for
fun, your app development is an activity not
entered into for profit but is considered a hobby. Your app income and expenses are treated under
what are commonly called "hobby income" rules. In
that case your gross earnings are entered on Line 21 (other income) of your
1040. You can claim your app development expenses only up to the amount of your income, and only if you itemize deductions on
a Schedule A. Even then, it must be as a 2% miscellaneous
itemized deduction. Hobby income, though, is not subject to self employment
tax.
