Beginning in 2018, miscellaneous itemized deductions are no longer deductible and therefore no hobby expense is able to reduce hobby income. If you are reporting hobby income, you won't be able to offset the income, even if you itemize deductions. No receipts would be necessary if you are not taking and deduction.
If you are taking a business deduction and you don't have some kind of receipt or substantiation of the expense, the IRS could disallow the deduction if you were to receive an inquiry regarding the expense or deduction.
Keep records if your hobby becomes more of a business than a recreational pursuit. Business owners typically use Schedule C to report profits and losses and to deduct a broad range of expenses not available to hobbyists. The IRS might consider your hobby a business when any or all of the following apply:
- The things you do to run your hobby-business, like hiring knowledgeable employees and advertising, point to your intent to make a profit.
- You earn your livelihood from the hobby.
- You've made a profit for at least three of the past five years.
- You hope to make a profit from some of your business assets down the road, like animals for breeding.
- You've made a profit from a similar hobby in the past.
Because the responsibility is on you to show that your hobby-business is entitled to business tax breaks, keeping detailed records will come in handy in case of an IRS tax audit
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