With respect to taxes, you have to report income from the "hobby" but you can only deduct expenses up to the amount of "hobby income". If you wind up with a net loss (i.e. expenses exceed income), you cannot deduct that loss from other income.
EDIT: Note beginning in 2018, the IRS doesn't allow you to deduct hobby expenses from hobby income. You must claim all hobby income and are not permitted to reduce that income by any expenses.
See https://turbotax.intuit.com/tax-tips/self-employment-taxes/4-tax-tips-for-money-making-hobbies/L89qz...
Thanks, @mesquitebean
The IRS basically uses several factors (see the link below) when making a distinction between a hobby or business activity.
See https://www.irs.gov/faqs/small-business-self-employed-other-business/income-expenses/income-expenses
