Income tax on eBay sales and eBay 1099-K

Key takeaways

• Whether or not you have to pay income taxes on eBay sales depends on the nature of your sales.
• If your eBay sales add up to more than $5,000 in a year, eBay will send you a Form 1099-K, which lists the total amount of payments you received throughout the year.
• When you’re selling on eBay as a business, deducting expenses, like shipping costs, office supplies, and advertising, can help lower your taxable income.

Do I have to pay income tax on eBay sales?

Unfortunately, there’s not a straight ‘yes or no’ answer to the question, “Do I have to pay income tax on eBay sales?” It depends on the nature of your sales.

If you occasionally sell personal items that you no longer need, like an old phone or clothes you’ve outgrown, you probably don't need to worry about taxes. These types of sales are generally considered sold at a loss and tax laws don’t allow a deduction of personal losses. The law does require you to claim a gain on a personal sale.  

However, if you're regularly selling items, especially if you're buying products to resell for profit, then you’re running a business. This means you need to report your income and pay taxes on your earnings. The IRS considers you a business if your goal is to make a profit and you regularly engage in selling activities.

Do I have to report eBay income on my taxes?

Yes, you do have to report your eBay income on your taxes. Whether you’re selling a few items here and there or running a full-fledged business, the money you make from eBay is considered income by the IRS, and it needs to be reported.

If you’re selling personal items occasionally and at a loss, you might not owe taxes on those sales, but you should still keep records just in case. However, if you’re selling regularly and making a profit, you need to report this income. This is true even if you don’t receive a 1099-K form from eBay.

What is a 1099-K form?

A 1099-K, or an “eBay tax form” as some think of it, lists the total amount of payments you received throughout the year. This includes all the money that came into your account, whether from selling items, shipping charges, or any other transactions. However, Form 1099-K doesn’t list your expenses, like the cost of goods sold, shipping, or listing fees. You’ll have to keep track of those on your own.

It's important to keep track of your sales and any related costs. This will make it easy to subtract your expenses from your total sales, so that you can determine your actual income from eBay and correctly report it when you file.

What happens if I sell more than $5,000 on eBay?

If your eBay sales add up to more than $5,000 in a year, eBay will send you a Form 1099-K. This form reports your earnings to the IRS, ensuring it’s aware of your sales activity. When you receive a Form 1099-K, it means that the IRS expects you to report this income on your tax return.

How much can I sell on eBay without paying tax in 2024?

All income you receive, whether you get it selling on eBay or working a conventional day job, is considered taxable unless there is a specific law making the income tax-free.

If you occasionally sell personal items at a loss, you generally don’t owe taxes on those sales. For example, if selling your camera lens for less than you bought it for, it doesn’t usually count as taxable income. However, it’s always a good idea to keep records of these transactions in case you need to explain them to the IRS.

On the other hand, if you’re running a business on eBay, which means you’re selling items regularly and for a profit, you need to report your income no matter how much you sell. If you are selling items occasionally and making a profit, you may have a hobby and not a business, your income is still taxable. Even if you don’t receive a 1099-K form because your sales are below $5,000, you’re still required to report your earnings and pay taxes on them.

Tax-deductible eBay-related expenses

When you’re selling on eBay as a business, keeping track of and deducting your eBay-related expenses can reduce the amount of income you need to report, so you could pay less in taxes and even get a bigger refund.

Common tax-deductible expenses for eBay sellers

• Cost of goods sold: This is the price you paid for the items you’re selling. If you’re buying products specifically to resell, keep a record of these costs.
• Shipping costs: The money you spend on shipping items to your buyers is deductible. This includes postage, packing materials, and any shipping insurance you purchase. If you make the items you sell, the cost of the materials and supplies are deductible.
• eBay fees: eBay charges various fees for listing and selling items. These fees are deductible expenses. Make sure to keep a record of all the fees you pay to eBay.
• Office supplies: If you use office supplies like tape, boxes, labels, and even a portion of your home internet for your eBay business, these can be deducted as business expenses.
• Advertising and promotion: Any money you spend on promoting your eBay store, such as advertising on social media or other platforms, is deductible.
• Vehicle expenses: If you use your vehicle for business purposes, like driving to the post office to ship items or picking up inventory, you can deduct related expenses, including gas, maintenance, and mileage.
• Home office: If you have a dedicated space in your home that you use exclusively for your eBay business, you may qualify for a home office deduction. This can include a portion of your rent or mortgage, utilities, and home insurance.
• Professional services: You can deduct fees you’ve paid for professional services like accounting, tax preparation, or legal advice related to your eBay business.

Keeping detailed records of all these expenses is crucial. By documenting and deducting your eBay-related expenses, you can significantly reduce your taxable income and save money when you file.

Whether you occasionally sell personal items on eBay, buy and sell on eBay as a hobby, or run an eBay business, it’s crucial that you understand all the requirements around reporting and paying taxes on your sales.

Taxes can be complicated, especially with eBay sales in the mix. Don’t file alone. Work with a Tax Pro who can help you get it right and get every dollar you deserve.

About the Author

Mark Steber is Senior Vice President and Chief Tax Information Officer for Jackson Hewitt. With over 30 years of experience, he oversees tax service delivery, quality assurance and tax law adherence. Mark is Jackson Hewitt’s national spokesperson and liaison to the Internal Revenue Service and other government authorities. He is a Certified Public Accountant (CPA), holds registrations in Alabama and Georgia, and is an expert on consumer income taxes including electronic tax and tax data protection.

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