Poshmark Taxes: 1099-K, Deductions, and Self-Employment

Money you make selling on Poshmark is taxable income in almost every case, and Poshmark taxes work the same way as taxes on any other self-employment or side income: you owe them whether or not the platform sends you a 1099-K, and whether you sell five items a year or five hundred. The one common carve-out is cleaning out your own closet at a loss. If you sell used clothing or accessories for less than you originally paid, those sales don’t create taxable income.

What changes the tax picture most is whether the IRS views your selling as a hobby or a business. That single classification determines which forms you file, whether you can deduct expenses, and whether you owe self-employment tax on top of income tax.

When Poshmark Sales Aren’t Taxable

If you’re selling personal items for less than you paid for them, you have a loss, not income. A jacket you bought for $120 and sold for $40 generated an $80 loss. Losses on personal-use property aren’t deductible either, so the transaction is effectively invisible to the IRS.

The wrinkle shows up when Poshmark sends you a Form 1099-K that lumps those closet-cleanout sales into a gross total. You still need to account for the amount on your return so the IRS can match its copy of the 1099-K to your filing. Report the 1099-K amount on Schedule 1 (Form 1040), then enter an offsetting adjustment on the same form so the net is zero.¹ You can also report the transactions on Form 8949, which carries over to Schedule D. Keep records of what you originally paid so you can prove the loss if the IRS asks.

Hobby or Business: The Classification That Drives Everything

The IRS treats selling as a hobby differently from running a resale business, and the gap between the two is significant. Business sellers file Schedule C, deduct their expenses, and pay self-employment tax on the net profit. Hobby sellers report income on Schedule 1, line 8j, and can’t deduct any expenses against it.² A hobbyist who took in $3,000 and spent $2,500 on inventory still owes tax on the full $3,000.

Classification turns on whether the activity is “engaged in for profit” under Internal Revenue Code Section 183.³ The IRS weighs nine factors — how you keep books, the time you put in, whether you rely on the income, your track record of profits, and others — with no single factor deciding it.

A useful benchmark: if your activity is profitable in at least three of five consecutive tax years, the IRS presumes it’s a business unless it can show otherwise.³ That’s not the only route. Sellers who source inventory specifically to resell, track expenses carefully, and put regular hours into listing and shipping are usually treated as businesses well before the three-year mark.⁴

If your Poshmark activity looks anything like a side hustle with regular sourcing, listing, and shipping, business treatment is almost always the better outcome. Being able to deduct expenses generally outweighs the self-employment tax that comes with it.

Form 1099-K: What Triggers One, and Why It Doesn’t Decide Whether You Owe

Poshmark files a Form 1099-K when you cross the federal reporting threshold, which is now $20,000 in gross payments and more than 200 transactions in a calendar year. The “One, Big, Beautiful Bill” retroactively reinstated that threshold, reversing the lower amounts that had been scheduled under the American Rescue Plan Act.⁵

The gross figure on the 1099-K is everything the buyer paid: item price, shipping, and any sales tax the platform collected. It doesn’t subtract Poshmark’s commission, so the number will be higher than what actually landed in your bank account. Business sellers start with that gross figure on Schedule C and then deduct fees, shipping, and other costs to arrive at net profit.

Two things trip people up. Some states set their own 1099-K thresholds well below the federal level, so you may receive a form even under $20,000. And not getting a 1099-K doesn’t erase your tax obligation. The threshold governs the platform’s paperwork, not your duty to report. A seller with $8,000 in profit across 50 transactions still owes tax on it.⁶

Deductions Available to Business Sellers

The biggest advantage of business classification is deducting ordinary and necessary expenses, which reduces both income tax and self-employment tax. A few categories cover most Poshmark sellers.

Cost of Goods Sold

Your largest deduction will almost certainly be what you paid for the items you sold. Buy a dress at a thrift store for $8, sell it for $45, and your cost of goods sold for that transaction is $8. Only items actually sold during the tax year count. Unsold inventory carries to the next year.

If you buy a bulk lot and sell only some of the items, allocate a reasonable cost to each piece. If you sell items from your own closet as part of your business, document what you originally paid. Without proof, the IRS may treat your cost as zero and tax the entire sale price.

Platform Fees and Shipping

Poshmark’s commission is fully deductible. The platform takes a flat $2.95 on sales under $15 and a 20% commission on sales of $15 or more.⁷ Any shipping costs you cover out of pocket that aren’t reimbursed by the buyer are deductible too. These two categories alone eat a real chunk of gross revenue.

Supplies and Mileage

Packaging materials, printer ink for labels, hangers and steamers used for photos, lighting equipment, and similar supplies used in your operation are deductible. Mileage to the post office, thrift stores, or estate sales for sourcing counts as a business expense. Track it as you go with an app or a simple log. Reconstructing mileage from memory at tax time is exactly the kind of thing that collapses under audit.

Home Office

If you use a dedicated space in your home exclusively and regularly for your Poshmark business, you can claim a home office deduction. The word “exclusively” is doing real work. A spare bedroom that doubles as a guest room doesn’t qualify. A corner of your garage where you photograph, store inventory, and pack shipments can, provided it’s a separately identifiable space used only for the business.⁸

The simplified method lets you deduct $5 per square foot up to 300 square feet, for a $1,500 maximum.⁸ The regular method calculates the actual percentage of your home expenses (rent, utilities, insurance) attributable to business use. For most Poshmark sellers the simplified method is easier and enough.

One exception is worth knowing. If you store inventory or product samples in your home, you can deduct that storage space even if it’s not used exclusively for business, as long as your home is the only fixed location of the business.⁸

Self-Employment Tax

Business sellers owe self-employment tax on net profit of $400 or more. This covers Social Security and Medicare contributions that would normally be split with an employer. Since you’re both parties, you pay both halves, for a combined 15.3% — 12.4% for Social Security and 2.9% for Medicare.⁹ The Social Security portion applies only to net earnings up to $184,500 in 2026.¹⁰ Medicare has no cap.

You calculate the tax on Schedule SE using your Schedule C net profit. One small offset: you can deduct half of your self-employment tax when figuring adjusted gross income, which lowers your income tax.⁹

Quarterly Estimated Payments

Nobody withholds taxes from self-employment income. If you expect to owe $1,000 or more in combined income tax and self-employment tax for the year, you’re required to make estimated quarterly payments.¹¹ The idea is to pay as you earn rather than facing one large bill in April.

The 2026 deadlines:

April 15, 2026, for income earned January through March
June 15, 2026, for income earned April through May
September 15, 2026, for income earned June through August
January 15, 2027, for income earned September through December

Submit payments with Form 1040-ES, by mail, through IRS Direct Pay, or via the IRS2Go app.¹¹

Miss payments or underpay and the IRS charges an underpayment penalty. You can avoid it by paying at least 90% of the current year’s total tax or 100% of the prior year’s tax, whichever is smaller. If your prior-year adjusted gross income was above $150,000, that second figure jumps to 110%.¹² In your first profitable year, basing estimates on projected current-year earnings is safer, since there’s no prior-year liability to fall back on.

The Qualified Business Income Deduction

Business sellers filing Schedule C may also qualify for a 20% deduction on qualified business income under Section 199A. The deduction applies to pass-through businesses — sole proprietorships, partnerships, and S corporations — and can meaningfully lower your tax bill.¹³

A clothing resale business isn’t a “specified service trade or business” (the category covering fields like law, consulting, and financial services), so it qualifies regardless of income level. If your taxable income before the deduction stays below the threshold, which is $201,750 for most filers or $403,500 for married couples filing jointly in 2026, the math is straightforward: deduct 20% of net business income or 20% of taxable income, whichever is less.

If your Schedule C shows $15,000 in net profit and you’re under the threshold, you exclude $3,000 from taxable income. The deduction doesn’t reduce self-employment tax, only income tax, but it’s a real benefit that many sellers miss.

Records the IRS Will Actually Accept

Good records separate the sellers who get through tax season from the sellers who panic in April. The IRS requires documentation supporting every item of income, deduction, or credit on your return.¹⁴ For a Poshmark business, that means:

Purchase receipts for inventory, including cash register tapes, credit card statements, or bank records showing payee, amount, date, and description
Poshmark sales records, such as screenshots or exports from your seller dashboard showing each sale, the price, the commission deducted, and shipping
Expense documentation, including receipts for packaging, mileage logs, home office measurements, and other operating costs
Inventory tracking showing what you bought, what you sold, and what remains at year-end

The hard part for resellers who source at garage sales, estate sales, and flea markets is that those purchases rarely come with formal receipts. When a receipt isn’t available, create a contemporaneous log entry with the date, location, items, and amount. Combining supporting documents, like a bank withdrawal near the date paired with your handwritten log, strengthens your position.¹⁵ A reconstructed spreadsheet built months later carries far less weight than a note written the same day.

Keep tax records at least three years from the date you file. If you underreport income by more than 25% of gross income, the IRS has six years to audit you. If you never file at all, there’s no time limit.¹⁶

What Happens If You Don’t Report

Failing to report Poshmark income doesn’t just risk a bigger bill later. It triggers penalties that compound quickly. If you don’t file by the deadline, the IRS charges a failure-to-file penalty of 5% of the unpaid tax for each month or partial month the return is late, up to 25%.¹⁷ A separate failure-to-pay penalty of 0.5% per month runs alongside it when you owe tax and haven’t paid. Interest accrues on top of both, currently 7% annually for the first quarter of 2026 and 6% for the second quarter.¹⁸

Certain patterns also raise audit risk. Reporting net losses year after year invites scrutiny under the hobby-loss rules, since the IRS will question whether you actually intend to make a profit. Claiming 100% business use of a vehicle, using rounded numbers instead of exact figures, and showing a sudden spike in deductions compared to prior years are all known triggers. Resellers who deal heavily in cash purchases should be especially careful with documentation, since cash transactions are harder for the IRS to verify.

State Sales Tax Is Handled for You

One thing you don’t need to worry about on Poshmark sales: state and local sales tax. Under marketplace facilitator laws adopted by nearly every state, Poshmark is legally responsible for calculating, collecting, and remitting sales tax on transactions made through its platform. You don’t need to register for a sales tax permit or file sales tax returns for your Poshmark sales.

This applies only to sales made through Poshmark. If you also sell through your own website or at in-person events, sales tax on those channels is on you.

1
Internal Revenue Service. Form 1099-K FAQs – Common Situations
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Internal Revenue Service. Know the Difference Between a Hobby and a Business
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Office of the Law Revision Counsel. 26 USC 183 – Activities Not Engaged in for Profit
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Internal Revenue Service. About Schedule C (Form 1040) – Profit or Loss from Business (Sole Proprietorship)
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Internal Revenue Service. Form 1099-K FAQs
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Internal Revenue Service. What Kind of Records Should I Keep
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Internal Revenue Service. Burden of Proof
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Internal Revenue Service. How Long Should I Keep Records
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Internal Revenue Service. Failure to File Penalty
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Internal Revenue Service. Quarterly Interest Rates