"I love dancing."
Translation:Ich tanze sehr gern.
I don't think using lieben in this context is as common in German. In any case, you would need to capitalise Tanzen since you're using it as a noun. That would be more like "I love dance", though - to talk about your liking of the activity Duolingo's sentence is the best translation. Another would be ich liebe es, zu tanzen ("I love to dance").