eBay Seller Tax Guide: FAQs, 1099-K Rules & Reporting
Selling on an ecommerce marketplace such as eBay® — whether as a hobby or a business — comes with tax obligations that every seller should understand. With new IRS reporting requirements for IRS Form 1099-K and the need to track sales and deductions accurately, staying informed about eBay’s tax policy is essential.
Here’s what you need to know about reporting your eBay income, handling Form 1099-K, and understanding how online sellers should comply with tax rules.
Do eBay sellers need to pay taxes?
Yes, eBay sales may be taxable, depending on how you use the platform. The IRS classifies sales in two main ways:
1. Personal sales (non-taxable in most cases)
Selling items at a loss is not taxable and does not need to be reported.
This includes selling used personal items (e.g., old furniture, clothes, or electronics) at a loss.
However, if you sell an item for more than you originally paid (perhaps you restored the item or its value increased over time), the profit may be subject to capital gains tax.
2. Business or frequent seller (taxable)
If you regularly buy and resell items on eBay to make a profit, the IRS considers you a business seller.
Business sellers must report all business income but can deduct related expenses.
Business sellers may need to pay self-employment tax.
New 1099-K tax reporting rules for eBay sellers
If you sell items online, you may have heard about the new IRS reporting thresholds for Form 1099-K. These changes have been postponed multiple times, causing confusion among sellers, so we’ve answered some 1099-K eBay tax FAQs below.
What is Form 1099-K?
Form 1099-K is issued by payment processors (PayPal®, Venmo®, eBay Payments, etc.) to report total sales transactions to the IRS. If eBay sends you Form 1099-K, they will also send a copy to the IRS.
2024 tax year Form 1099-K threshold
Sellers who received over $5,000 in gross payments through eBay in 2024 will receive a 1099-K.
While no tax laws have changed, this is a change in the reporting threshold, which was previously for those who reached at least 200 transactions totaling $20,000 or more.
Even if you don’t receive a 1099-K, you are still required to report all taxable income on your return.
2025 and 2026 Form 1099-K thresholds
Starting in 2025, the threshold will lower again to $2,500.
This is part of the IRS's phased approach to eventually implement a $600 reporting threshold in 2026 unless further changes are made.
Does a 1099-K mean I owe taxes?
Receiving Form 1099-K does not automatically mean all sales are taxable — you can deduct the original cost of goods sold (COGS) and business expenses before determining taxable income.
Still have questions? Check out our Form 1099-K guide for more details about how to use this important document during tax filing.
How to calculate your taxable income from an online sale
Understanding the capital gains tax rate is also essential when selling on eBay. If you sell an item for more than you originally paid, the profit is considered a capital gain. The tax rate depends on how long you held the item before selling it:
Short-term capital gains (held for one year or less) are taxed as ordinary income, meaning they are subject to your regular income tax rate.
Long-term capital gains (held for more than one year) benefit from lower tax rates, typically 0%, 15%, or 20%, depending on your taxable income and filing status.
Note: There are some exceptions to these rules (like when selling collectibles). We’ll discuss that later.
Calculating your gain
As an online seller, you only owe taxes on your net income — the profit you make after deducting eligible expenses. Here’s how to calculate your taxable gain:
1. Determine gross sales.
This includes the total amount received from the sale of goods, as shown on IRS Form 1099-K (if you received one).
2. Deduct allowable expenses.
You can reduce taxable income by subtracting business-related expenses. The following may be tax-deductible for eBay sellers:
Cost of goods sold (COGS): The amount you originally paid for items resold.
Fees: Includes final value fees, listing fees, and PayPal/eBay transaction fees.
Shipping & packaging costs: USPS, FedEx, UPS fees, packing materials, and labels.
Business software & tools: Inventory tracking, bookkeeping services, or eBay store subscriptions.
3. Calculate net profit.
Gross Sales – Deductions = Net Income (Taxable Profit)
If this sounds like a lot, don’t stress too much — TaxAct® can walk you through how to report 1099-K income on your tax return.
Tax calculators for eBay sellers
To make estimating taxes easier, consider using one of our helpful tax calculators:
Capital Gains Calculator: Use this calculator if you sold items for a gain on eBay last year. Just answer a few simple questions and tell us how long you had the item before selling it. Based on that information, we’ll help you determine the tax rate on your profits.
Self-Employment Tax Calculator: If you run a profitable side hustle, you may owe self-employment tax (SE tax). SE tax covers your Social Security and Medicare taxes that would otherwise come out of your paycheck. Plug in your self-employment income, and we’ll calculate how much you could owe in SE taxes this year.
Income Tax Calculator: Knowing how much federal income tax you owe is the first step to estimating your tax refund. Just answer a few simple questions about your life, income, and expenses. Based on your answers, we’ll help you calculate your income tax amount and use that number to estimate your tax refund for this year.
Tax Bracket Calculator: Not sure what tax bracket you fall in? No problem. Tell us your filing status and expected gross income, and we’ll tell you your federal tax bracket and how much income tax you could owe this year based on those numbers.
How to report eBay income on your income tax return
For casual sellers (occasional sales)
If you sell personal items for less than you paid, you don’t need to report any income from the sale.
If you sell an item for more than you paid, report the profit as a capital gain on Schedule D (Form 1040). TaxAct can help you do this with ease.
For business sellers (regular sales for profit)
Report income and expenses on Schedule C (Form 1040).
Pay self-employment tax (15.3%) on profits.
Consider making quarterly estimated tax payments to avoid penalties (TaxAct can help you do this).
Reporting sales of collectibles & high-value items
The IRS classifies certain high-value items as collectibles, which have their own tax rules. For tax purposes, the IRS defines a collectible as:
Any work of art
Any rug or antique
Any metal, gem, stamp, or coin (with limited exceptions)
Any alcoholic beverage
Any other tangible personal property the IRS determines is a “collectible”
If an item has an inherent value due to its market rarity, you should consider it a collectible and report it as such on your tax return.
eBay’s collectible page on their website can also give you an idea of what items fall into the collectibles category. Some common examples are sports cards, comic books, etc. If you can find it on this collectibles page, it’s likely also considered a collectible by the IRS. (One exception to this is something like NFTs, which the IRS considers to be digital assets and does not classify as collectibles.)
Tax rate on collectibles
Short-term capital gains
(you held the item for one year or less) are taxed as ordinary income based on your tax bracket.
Long-term capital gains
(you held the item for over a year) are taxed at 28% or your ordinary tax rate, if lower. This long-term tax rate is higher than the typical 0-20% tax rate on non-collectible capital gains.
Collectible sale example
For this example, let’s say you are a hobby seller who wants to sell an antique for a profit.
You bought an antique for $3,000 several years ago.
You spend $500 on restoration (not deductible for hobby sellers since you are not a business).
You sell it for $5,000, and eBay takes $500 in seller fees.
Your cost basis: $3,000 + $500 (eBay fees) = $3,500
Your gain: $5,000 (Sale Price) - $3,500 (Cost Basis) = $1,500 taxable income
Since you had the item for over a year, your tax rate will be 28% or your ordinary tax rate, whichever is lower.
Special rules for selling inherited items
If you inherit an item, your cost basis is its fair market value (FMV) at the time of inheritance, not what the original owner paid. Fair market value is the current value of your item in an open market.
Example: Selling an inherited antique
The antique’s FMV at inheritance (your cost basis): $3,000
You sell it for $3,800
eBay charges $490 in seller fees
Here’s the math: $3,800 (Sale Price) - $3,000 (Cost Basis) - $490 (fees) = $310 capital gain
You’d report $310 as taxable income in this scenario. Since the IRS considers antiques to be collectibles, your tax rate would be the lower of 28% or your ordinary tax rate.
How do I determine the item’s fair market value at the time of inheritance?
When calculating your cost basis using FMV, make sure you consider the item's condition when it was inherited. Look at comparable sales of similar items online to determine the item’s FMV. If you cannot easily determine the fair market value of an item in this way, it might be best to get an expert appraisal for documentation purposes.
eBay seller FAQs
Do I pay taxes if I sell an inherited item?
Yes, but only if you sold the item for a profit. Inherited items use a “stepped-up basis,” meaning their cost basis is the fair market value at the time of inheritance. You typically owe capital gains tax if you sell it for more than this amount.
Do I pay taxes on a gifted item I sell?
Yes, if you sold the item for a profit. Unlike inherited items, if you sell a gift, the cost basis is usually the donor’s original purchase price.
How can I lower my taxable income from eBay sales?
If you are a business seller, you can deduct business expenses, such as shipping costs, eBay fees, and the original cost of the item sold. Business sellers can also deduct additional expenses like office supplies, advertising, and mileage.
For more detailed info on what you can deduct as a small business owner selling on platforms like eBay, check out 16 Small Business Tax Deductions.
Can I deduct a loss on personal sales?
Unfortunately, no. You cannot deduct the loss if you sell personal items for less than what you paid. You can still report the loss if you wish, but it won’t reduce your taxable income.
Can I deduct expenses for selling collectibles?
If you are in the business of selling collectibles, your expenses are deductible like any other small business. However, expenses are not tax-deductible if you only sell collectibles as a personal item or as a hobby.
What if I only sell a few things on eBay?
If you’re not selling for profit and your items are personal possessions, you typically don’t owe taxes. But it’s still a good idea to keep records of items you sell in case of IRS inquiries.
Do I have to charge sales tax on eBay sales?
Most states now require online marketplaces (like eBay) to collect and remit state sales tax on behalf of sellers. However, you may still owe state income tax on profits. If you’re unsure, check with the state tax authority or consult a professional for tax advice.
What is value-added tax, and do I need to pay it?
Value-added tax (VAT) is a consumption tax applied to goods and services in many countries outside the U.S. If you sell internationally, you may need to comply with VAT regulations in applicable jurisdictions. The same goes for goods and services tax (GST), a consumption tax applied to goods and services in certain countries.
Like sales tax, some countries require eBay to charge and remit applicable taxes like VAT and GST on your behalf. However, if you sell internationally, it’s a good idea to familiarize yourself with VAT obligations to ensure you comply with all tax rules. If you’re unsure, don’t hesitate to consult a tax professional!
eBay never sent me Form 1099-K. What should I do?
If you expected to receive Form 1099-K but did not, first check your eBay account (in your Seller Hub, look for the My eBay tab) for an electronic tax form. It’s also a good idea to check your email notifications for any updates from eBay and ensure your taxpayer identification number (TIN) is correctly linked to your account. If you still haven’t received the form and meet the reporting threshold, it may be time to contact eBay customer support for assistance.
Remember, regardless of whether you receive a Form 1099-K, you must still report all taxable income on your income tax return.
What eBay sellers should do to prepare for tax filing
1. Keep good records.
Always save receipts, track costs, and document sales to calculate your tax liability accurately.
2. Verify your TIN with eBay.
If you meet the 1099-K reporting threshold, eBay will require your Social Security number (SSN), employer identification number (EIN), or taxpayer identification number (ITIN). Providing incorrect or missing information can lead to 24% IRS backup withholding on your earnings.
3. Understand how to use Form 1099-K.
Your Form 1099-K will report total payments received — not necessarily taxable income. Compare it with your own transaction records and deduct eligible expenses before reporting income.
The bottom line
Navigating taxes as an eBay seller doesn’t have to be intimidating. By keeping accurate records, understanding your tax obligations, and knowing which deductions you can claim, you can confidently report your income while minimizing your tax burden. Plus, TaxAct makes filing your taxes easy. Our tax preparation software can guide you through reporting your eBay sales and tax information, whether you’re a casual seller or running an eBay business.
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