Whether you have to claim eBay sales on your taxes depends on whether you actually made money. Selling used personal items for less than you paid creates no taxable income and, in most cases, nothing to report. Making a profit is a different story: the IRS wants to hear about it, and how much you owe depends on whether your selling counts as a business or a hobby.
Selling Your Own Used Stuff at a Loss
This is what most casual sellers are really asking about. You cleared out the closet, unloaded some old electronics, and now you’re wondering if the IRS wants a cut. If you sold those items for less than you originally paid, you have no tax liability on the sales. A jacket you bought for $80 and sold for $30 is a $50 personal loss, and personal losses are not taxable events.1Internal Revenue Service. What to Do With Form 1099-K
You also can’t deduct the loss. Personal losses are not deductible either way. So if you didn’t receive a Form 1099-K, there’s nothing to report and nothing to pay.
If a 1099-K does show up reporting those sales, you need to account for it on your return so the IRS doesn’t assume the full amount is profit. You have two options. Report the gross amount on Schedule 1 (Form 1040) with an offsetting entry that brings the net to zero, or report the sale on Form 8949: proceeds in column (d), original cost in column (e), code “L” in column (f) to flag it as a nondeductible personal loss, and an adjustment in column (g) that zeros out the loss.2IRS. Instructions for Form 8949 Either approach works. The point is to show the IRS the money moved and explain why none of it is taxable.
Hobby or Business? The IRS Draws a Line
Once you’re consistently making money, the IRS wants to know whether your eBay activity is a business or a hobby. That single classification controls whether you can deduct expenses, whether you owe self-employment tax, and which forms you file.
A business, for tax purposes, is an activity pursued with genuine intent to make a profit. A hobby is something done primarily for personal enjoyment that happens to generate income. The IRS weighs nine factors to decide, including how businesslike your records are, how much time you invest, your expertise, your profit history, and whether you rely on the income.3The Tax Adviser. Nine Factors That Determine Whether an Activity Is a Hobby No one factor decides it.
There’s a useful safe harbor. If your eBay selling turns a profit in three of the last five tax years, the IRS presumes it’s a business.4Office of the Law Revision Counsel. 26 U.S. Code 183 – Activities Not Engaged in for Profit
Why the Classification Costs or Saves You Money
If your activity is a business, you file Schedule C and report gross income minus every ordinary and necessary expense. Net profit flows to your Form 1040.5Internal Revenue Service. About Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship) The catch is that net profit is also subject to self-employment tax.
If your activity is a hobby, you report all gross income on Schedule 1 (Form 1040), line 8j, and you cannot deduct any of your expenses.6Internal Revenue Service. Here’s How to Tell the Difference Between a Hobby and a Business for Tax Purposes The suspension of hobby expense deductions from the 2017 Tax Cuts and Jobs Act was made permanent by the One, Big, Beautiful Bill Act signed in 2025. So if you sold $3,000 worth of items as a hobby and spent $2,500 acquiring them, you owe income tax on the full $3,000. Hobby income isn’t hit with self-employment tax, but for most sellers with real costs, losing the expense deductions makes the hobby label the more expensive one.
When eBay Will Send You a 1099-K
Form 1099-K is an information return that eBay files with the IRS and sends to you. Getting one doesn’t mean you owe tax on the full amount. It means the IRS knows money moved through your account and expects the number to appear somewhere on your return.
The federal reporting threshold went through several planned reductions, but the One, Big, Beautiful Bill Act reverted it. For the 2026 tax year, eBay is only required to send you a Form 1099-K if your gross payments exceed $20,000 and you had more than 200 transactions.7Internal Revenue Service. IRS Issues FAQs on Form 1099-K Threshold Under the One, Big, Beautiful Bill Both conditions have to be met. $25,000 in sales over 150 transactions doesn’t trigger the federal requirement.
Two important caveats. Some states set lower thresholds, so you may receive one anyway. And your tax obligation doesn’t depend on whether a form arrives. Profit is taxable whether the IRS sends you a piece of paper or not.
What to Do If the 1099-K Overstates Your Income
The IRS matches the income on your return against the information returns it receives. When the numbers don’t line up and you haven’t explained why, expect a CP2000 notice asking you to pay the difference. If the agency decides you were negligent or substantially understated your income, it can add an accuracy-related penalty of 20% on top of the underpayment.8Internal Revenue Service. Accuracy-Related Penalty
The fix is simple: account for the full 1099-K amount somewhere on your return. Personal items sold at a loss get zeroed out on Schedule 1 or Form 8949. Business sales go on Schedule C alongside your deductions. Show the IRS what came in, explain what it was, and walk them through how you arrived at the taxable amount. The one strategy guaranteed to create problems is ignoring the form.
Calculating What You Actually Owe on Business Sales
Your taxable profit is not the number on the 1099-K. It’s total sales minus the cost of what you sold minus every other legitimate business expense. Failing to track these costs is how eBay sellers overpay.
Cost of Goods Sold
Cost of goods sold is what you paid to acquire an item, plus any cost to get it ready to sell. A vintage camera you bought for $75 at a thrift store and sold for $200 has a COGS of $75. Add $10 for cleaning supplies and replacement parts and your COGS becomes $85, leaving $115 in gross profit. You need documentation for every purchase, which is why keeping receipts matters more than most casual sellers realize.
Everything Else You Can Deduct
Beyond COGS, ordinary and necessary costs of running the operation are deductible:
- eBay fees: listing fees, final value fees, promoted listing fees, and store subscriptions
- Shipping: postage, carrier fees, and insurance you pay out of pocket
- Packaging: boxes, tape, bubble wrap, poly mailers, labels
- Mileage to the post office, thrift stores, estate sales, and other sourcing locations, tracked at the IRS standard rate
- Home office: a share of rent or mortgage interest, utilities, and insurance if you have a dedicated space used exclusively and regularly for the business
- Technology: a proportional share of internet, phone, and any listing, pricing, or bookkeeping software
Each of these needs documentation. A spreadsheet estimate won’t hold up if the IRS asks. Keep the actual receipts, bank statements, and mileage logs.
Self-Employment Tax and Quarterly Payments
If your eBay activity is a business and your net earnings top $400, you owe self-employment tax on top of income tax. This covers the Social Security and Medicare contributions an employer would normally split with you. Because you’re both sides of the equation, you pay both halves.9Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
The combined rate is 15.3%: 12.4% for Social Security on net earnings up to $184,500 in 2026, and 2.9% for Medicare with no cap.10Social Security Administration. Contribution and Benefit Base You calculate it on Schedule SE. You can deduct half of what you pay when figuring adjusted gross income, which reduces your income tax somewhat.
If you expect to owe $1,000 or more for the year across income tax and self-employment tax combined, you’re generally required to make estimated quarterly payments using Form 1040-ES.11Internal Revenue Service. Estimated Taxes For 2026, the deadlines are April 15, June 15, September 15, and January 15, 2027. Missing them can trigger a penalty even if you pay the full balance when you file. This catches a lot of first-year sellers off guard because they’re used to employer withholding doing the work for them.
Records You Need to Keep
Good records are the only real protection you have if the IRS looks closely. Keep documentation for every item of income, deduction, or credit for at least three years from the date you file. If you underreport gross income by more than 25%, that window extends to six years, and if you never file, it never closes.12Internal Revenue Service. How Long Should I Keep Records
For eBay sellers, the essential records are proof of what you paid for each item (receipts, credit card statements, bank records), eBay transaction reports showing sales and fees, shipping receipts, and a mileage log if you’re deducting driving. eBay provides downloadable transaction reports, but download and save them regularly. Platform data doesn’t stay available forever. Thrift store and garage sale purchases are the hardest to document. A contemporaneous log with date, location, item description, and price paid is better than nothing and holds real weight with the IRS.
Sales Tax Is a Separate Issue
Everything above is federal income tax. Sales tax is different, and for eBay sellers it’s largely handled for you. Under marketplace facilitator laws, eBay collects and remits sales tax on your behalf in 46 jurisdictions. It’s added to the buyer’s total at checkout, collected by eBay, and sent to the state. You don’t register, don’t file sales tax returns, and don’t track rates for sales made on the platform.
That changes if you also sell through your own website, at craft fairs, or through other channels where no marketplace is collecting for you. In those cases, you may need to register in any state where your sales pass the economic nexus threshold, which is $100,000 in annual sales in most states. If your selling is entirely on eBay, this isn’t something you need to worry about.