Hi sev4titi, Thanks for your question.
Etsy is considered a Third Party Settlement Organization (TPSO), and will issue you a Form 1099-K if the aggregate sales amount is more than $600 for tax year 2022.
It is up to you to determine if this is a hobby (recreational pursuit) or a self employment (profit making endeavor.)
If hobby, you need to report income, but the cost can only be deducted if you itemize deductions (Schedule A).
If self employment, you can report self employment income and expenses on Schedule C, Profit or Loss from Business.
Below article explains further.
Hope the above helps.
The difference between a hobby and a business depends on your intent. Here is the 9 factor test the IRS uses.
https://www.irs.gov/newsroom/earning-side-income-is-it-a-hobby-or-a-business
Basically, if it is a regular and ongoing effort with a profit motive, it is a business, even if it is small.