You can find almost anything for sale on eBay, from a piece of fine art to clippings of Justin Bieber’s hair. So it's no surprise that the IRS doesn't view all sellers alike in the online marketplace. You may not have to pay tax at all if you are essentially hosting an online garage sale, but if you run your eBay account more like a business, you should be reporting your sales to the IRS.
Key Takeaways
- If your online auction sales involve used items and are the equivalent of an occasional garage or yard sale, you generally don't have to report income from those sales, especially if you are selling the items for less than you paid for them.
- If your eBay sales are classified as a hobby, you have to report the income on Form 1040, but you won't be able to offset your profits by deducting expenses.
- If you earn money from your eBay sales, your activities will be classified as a business and you will have to report your net income (gross income minus allowable business-related expenses) from your eBay sales.
Not All eBay Sales are subject to income tax
Not every eBay sale is subject to income tax, but most are. If you use the site to get rid of household articles you've used in the past, you may qualify for "occasional garage or yard sale" treatment. According to the IRS, if your online auction sales are the Internet equivalent of an occasional garage or yard sale, you generally do not have to report income from those sales.
Assuming that you originally bought the used items for more money than you are selling them for, you don't have to report the income received from the eBay sale. For example, if you sell a bicycle that you paid $500 for two years ago for $350 on eBay, you usually don't have to notify the IRS—and you can't claim a loss on it.
Hobby sales must be reported
If you and the IRS classify your eBay sales as a hobby, you'll have to report the income on Form 1040. For tax years prior to 2018, you report your expenses as an itemize deduction on Schedule A. Beginning in 2018, you are no longer eligible to take a deduction for hobby expenses.
Since you cannot use hobby expenses to reduce your hobby income, you won't be able to use a loss from hobby sales to reduce other income. This can be important if you make money in other activities.
However, if your eBay activities are considered a business, you can use your loss as a deduction to reduce your other business income, say from landscaping.For example, let’s say that you have:
- A net loss of $5,000 from your eBay sales operation.
- A taxable income of $15,000 from a landscaping business.
- $15,000 (income) - $5,000 (loss) = $10,000 (business income).
Distinguishing between a hobby and a business is not an exact science. The IRS looks to many factors including:
- Frequency of your eBay sales
- How much you earn
- How much time you spend working on the hobby/business
TurboTax Tip:
If your eBay activity is classified as a business, you may be able to deduct a number of business expenses, including the costs to purchase or repair items you sell, advertising expenses, and the portion of your phone and internet charges related to your business.
Using eBay to make profits is usually a business
If you sell and buy articles on eBay in order to earn money, the IRS will likely classify your sales activities as a business. This means you will have to report net income from eBay sales. Report your total gross income on Schedule C, then reduce it to net income by subtracting the amounts you spent for allowable business-related expenses.
For example, if your income is $45,000 and you have “business-related expenses” that total $10,000:
- $45,000 - $10,000 = $35,000
- $35,000 is your net income on your Schedule C
Business tax deductions for eBay sellers
The only tax deductions you can use to reduce your gross eBay sales income are those authorized by the IRS, but you'll have quite a few to choose from. Consider whether you qualify for:
- Costs to purchase or fix up the items sold
- Deductions for business use of your vehicle, either actual expenses or the standard mileage rate. For 2023 the standard mileage rate is 65.5 cents per mile. For 2024, the standard mileage rate increases to 67 cents per mile.
- Advertising expenses
- Apportioned amount of phone and Internet charges related to your eBay business
If you're still unsure if something is deductible, check out a more comprehensive list of common small business expenses.
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FAQs
IRS regulations require all payers, including online marketplaces like eBay, to issue a Form 1099-K for all sellers who meet the reporting threshold, namely $20,000 and 200 transactions in 2023.
How much money do you need to make on eBay to file taxes? ›
For tax years prior to 2023, the threshold is more than $20,000 in gross sales plus more than 200 payment transactions on eBay. For tax years beginning with 2023, if you have third-party payment transactions totaling more than $600 then you should receive a 1099-K form reporting this income to the IRS.
How do I handle taxes when selling on eBay? ›
If you are an eBay seller in the United States, you must report your income from your eBay sales on your federal tax return, regardless of whether you are running a hobby or a business. However, your status depends on how you report your income and expenses and the tax deductions and credits you can claim.
How to report eBay sales on taxes without 1099? ›
Given the type of items you sell, I assume these are not personal possessions you are selling, so you will be reporting your sales on schedule C as self employment income. You can deduct all of your selling costs to arrive at taxable income.
What happens if I sell more than $600 on eBay? ›
If we sold more than $600 worth of anything during each year, it will be reported to the IRS and their system will treat it as reportable income. Even if you are selling at a loss, or reselling a used item of yours, and you won't legally be required to pay any tax on it.
What is the $600 rule? ›
The new ”$600 rule”
Under the new rules set forth by the IRS, if you got paid more than $600 for the transaction of goods and services through third-party payment platforms, you will receive a 1099-K for reporting the income.
Do I have to report eBay sales under $20,000? ›
Recap of the IRS reporting changes
For tax year 2023, eBay and other online payment platforms are only required to report transactions to the IRS once you hit an annual threshold of $20,000 in gross payments and at least 200 transactions.
How much do you have to sell on eBay to pay taxes in 2024? ›
For tax year 2024, the IRS is planning a threshold of $5,000. Please visit our Form 1099-K FAQ page for more information.
Is selling personal items considered income? ›
If you made a profit or gain on the sale of a personal item, your profit is taxable.
What can I write off on my taxes as an eBay seller? ›
Possible deductions include inventory costs, shipping fees, eBay and PayPal fees, travel expenses, software, as well as office expenses. Note that you can only claim home office expenses if you use the space exclusively for your eBay activities.
Starting on January 1, 2024, IRS regulations require all businesses that process payments, including online marketplaces like eBay, to issue a Form 1099-K to sellers who receive $600 or more in gross payouts.
Can you write off shipping costs on eBay? ›
Yes, shipping costs to ship resale items to buyers are a business expenses. If the item sells for $50, for example, and shipping cost is $5, you would report $55 in revenue (amount paid to you by customer) then report $5 to 'Shipping Costs' on your Schedule C. Your Ebay/Poshmark fees are also an expense.
What are the rules for eBay seller deduction? ›
Sellers may only deduct an amount from the buyer's refund in order to recover lost value when an item is returned used, altered or damaged. Sellers may not use this protection to recoup market losses on items returned in the same condition or recoup return postage and/or restocking costs.
How much can I sell online before paying taxes? ›
But tax law changes now require any website that processes more than $600 in payments to a customer to report them to the IRS. The reporting requirements take effect for the 2023 tax year. You still must pay tax on sales totaling less than $600 a year, but websites are not required to report those sales to the IRS.
How do I get no tax on eBay? ›
If you are a tax-exempt buyer, we have a buyer exemption system that allows you to submit sales tax exemption certificates to eBay and make purchases without paying sales tax. Alternatively, you may be able to get a credit for sales tax paid to eBay directly from your state.
How much can I sell on eBay without paying tax in 2025? ›
TAXES 2024 & 2025 $5K then only $600 for Calendar YEAR.
What is the threshold for 1099k in 2024? ›
1099-K Reporting Changes
However, the IRS will begin to phase-in the lowered threshold starting in 2024, with a $5,000 threshold for the 2024 tax year (for taxpayers preparing their 2023 returns, 2023 will simply be treated as another transition year).
What is the minimum for 1099-K reporting? ›
A payment app or online marketplace is required to send you a Form 1099-K if the payments you received for goods or services total over $20,000 from over 200 transactions.
Do I have to report 1099-K if it is less than $20,000? ›
Not necessarily. The 2023 federal reporting threshold of over $20,000 and 200 transactions is a reporting requirement for TPSOs, but companies may still send a Form 1099-K for payments for goods or services payments that are less than that amount.
