How to file taxes on eBay sales in 2025

Selling on eBay can be a fun hobby or a serious business. It’s important for everyone—whether you’re a casual seller or a full-blown business owner—to know how to report eBay sales on taxes. In this post, you’ll find information on what forms you need, how to calculate income, and more to make tax season a little easier when you’re selling on this online marketplace.

Jump to:

• Understanding eBay Taxes
• What’s the difference between a hobby and a business?
• How to calculate your eBay sales
• Which eBay sales are subject to income tax?
• Tax deductions for eBay sellers
• What is a 1099-K?
• Will eBay send a 1099-K?
• How to fill out Form 1040 for eBay business sales
• Find peace of mind come tax time 
• Frequently asked questions

Understanding eBay taxes

Many people find tax season overwhelming. If you’re a hobbyist or small business owner selling through eBay, it can feel like you’re on your own. Here are the basics you should know about reporting income from eBay:

• You need to report eBay income with Form 1040. You'll also receive Form 1099-K if you meet the reporting threshold, whether you’re categorized as a hobby or a business.
• If you sell on eBay as a business, you can deduct business-related expenses from your reported income.
• If you only occasionally sell personal items, and especially if you sell them for less than you originally paid, you generally don't need to report these sales on your taxes.
• Depending on your state and the buyer's location, you may also need to collect and remit sales tax on your eBay sales.
• For the 2025 tax year, eBay will issue you a Form 1099-K if your gross sales exceeded $5,000 in 2024.

Not sure how much of your income to report? Or whether your sales constitute business income? Keep reading to learn more.

What’s the difference between a hobby and a business?

Although you need to report all profits and/or income from both a hobby and a business, you must first determine whether your sales qualify as a hobby or a business. This distinction is important for claiming the appropriate deductions and handling losses.

The IRS provides basic factors it uses to determine if an activity is a hobby or business. Some questions you can ask yourself to help make this decision based on those factors include:

• Does the activity show the intention to make a profit?
• Does the activity make a profit? How much of a profit?
• Can you reasonably expect future profit from the activity?
• Do you rely on income from the activity?
• Do you make decisions in conducting the activity to increase profit?
• Does the activity require “businesslike” maintenance such as bookkeeping?
• Does the activity create economic losses? Are these to be expected with how you conduct the activity, or are they beyond your control?
• Do you have the resources to turn this activity into a successful business?

How to calculate your eBay sales

To report your eBay sales correctly, you need to know the difference between your gross sales and your net income.

• Gross sales is the total amount you receive from buyers, including shipping costs. You can find this in your eBay sales records.

• Net income (for businesses) is your profit after deducting expenses like eBay fees, shipping costs, and the cost of the items you sold.

• Hobby income is reported as gross income. You are no longer allowed to deduct any of your hobby expenses.

Accurately calculating your income is the first step to correctly filing your taxes. Knowing your gross sales and net income (or loss) will help you determine which tax forms you need to complete and how to report your eBay activity to the IRS.

Which eBay sales are subject to income tax?

Let’s say you used eBay to sell off used items for less than you originally paid for them. These amounts are not considered taxable income since you made no profit. The IRS states that “If your online auction sales are the Internet equivalent of an occasional garage or yard sale, you generally do not have to report the sales.”

To show the IRS you did not make a profit on your sales of used goods, it’s always advisable to keep receipts of the original purchase. If you don’t have the receipt showing how much you spent on your inventory, you can use the fair market value to price your items. Remember, you can also add shipping and packing fees to the cost of the item.

However, if you sell the items for more than the original price, you’ll need to report that gain on Schedule D: Capital Gains and Losses and attach it to your Form 1040. So, for example, if you bought an antique chair for $100 and sold it for $150, you have a gain of $50 to report.

There can be exceptions. In addition to cases where you’ve made a profit selling a used item, the IRS may also categorize your eBay sales as taxable income if there are regular, recurring transactions like a business.

Tax deductions for eBay sellers

If the IRS classifies your eBay activity as a business, you can deduct a variety of expenses that are "ordinary and necessary" for your operations. This can significantly reduce your taxable income and the amount of tax you owe.

Possible Deductions:

• Cost of goods sold (COGS): The cost of the items you sell, including any materials and labor used to produce them.
• eBay fees: Listing fees, final value fees, and any other fees charged by eBay.
• Payment processing fees: Fees charged by PayPal, Stripe, or other payment processors.
• Shipping costs: Postage, packaging materials, and shipping insurance.
• Home office expenses: If you have a dedicated space in your home used exclusively for your eBay business, you can deduct a portion of your rent or mortgage interest, utilities, and other home-related expenses.
• Office supplies: Pens, paper, printer ink, and other office essentials.
• Marketing and advertising: Costs associated with promoting your eBay listings.
• Software and subscriptions: Fees for listing tools, accounting software, and other business-related software.
• Travel expenses: Costs incurred for business travel related to your eBay activities.
• Insurance: Premiums for business insurance policies.
• Legal and professional fees: Fees paid to attorneys, accountants, or other professionals for business-related services.

Taking advantage of these deductions can help you minimize your tax liability and increase your profits. Be sure to keep accurate records of all your expenses to support your deductions if you're audited by the IRS.

What is a 1099-K?

Form 1099-K is an IRS informational form used to report payments received through third-party payment networks. These networks include companies like PayPal, Venmo, and, of course, eBay. It's essentially a record of the payments processed on your behalf by these platforms.

The purpose of the 1099-K is to help the IRS track income from online transactions and ensure that individuals and businesses are accurately reporting their earnings. The form shows your gross payments received throughout the year but doesn't consider any deductions or expenses.

You'll use the information from your 1099-K, along with your own records of income and expenses, to complete your tax return. It's important to remember that even if you don't receive a 1099-K, you're still responsible for reporting all your income to the IRS.

Will eBay send a 1099-K?

eBay is required to send you a Form 1099-K if you meet certain criteria. This form reports the total amount of payments processed for you through eBay's managed payments system.

Keep in mind that the current threshold of $5,000 is significantly lower than in previous years, so more sellers will likely receive a 1099-K. The IRS is making this change to improve tax compliance and ensure that businesses are accurately reporting income from online sales.

Even if your gross sales were below $5,000 in 2024 and you don't receive a 1099-K from eBay, you're still responsible for reporting any profit you made from your eBay sales on your tax return. It's important to keep thorough records of your income and expenses throughout the year to make tax filing easier and ensure you're meeting your tax obligations.

How to fill out Form 1040 for eBay business sales

Form 1040 is the standard IRS form used to file your individual income tax return. Here's a step-by-step guide to reporting your eBay sales if you're running an eBay business:

Step 1: Gather your records

Accurate record-keeping is essential. Before you begin, organize these documents:

• Form 1099-K: This form reports your gross eBay sales (if over $5,000 in 2024).
• Income records: Detailed records of all your eBay sales, including gross sales, returns, refunds, and fees.
• Expense records: Receipts and invoices for all your business expenses, like shipping, eBay fees, and home office costs.

Having these records ready will simplify the tax filing process.

Step 2: Complete Schedule C (profit or loss from business)

Schedule C is where you report your eBay business income and expenses.

Here is what information is included: 

• Provide your information: Enter your name, Social Security number, and business details.
• Report income: Enter your gross sales, subtract returns and allowances, and calculate your gross profit.
• Report expenses: Itemize and categorize your business expenses. This includes things like employee benefits, advertising, rent, and utilities, among others.
• Calculate COGS (if applicable): If you're selling items you've purchased or produced, calculate the cost of goods sold.
• Calculate net profit or loss: Subtract your total expenses from your gross profit.

This form determines your business's profitability for the year.

Step 3: Calculate and pay self-employment tax (if applicable)

If you earned a net profit of $400 or more from your eBay business, you'll need to pay self-employment tax.

• Complete Schedule SE (Self-employment tax): Use this form to calculate the amount of self-employment tax you owe.

This tax covers Social Security and Medicare.

Step 4: Complete Form 1040

Form 1040 is the main form for your individual income tax return.

• Transfer Schedule C information: Transfer the net profit or loss from Schedule C to Form 1040.
• Report other income: Include any other income you have, like wages or investments.
• Claim deductions: Take the standard deduction or itemize deductions on Schedule A.
• Calculate tax liability: Determine your total tax liability.
• Claim tax credits: Subtract any eligible tax credits.
• Make your payment: Pay any taxes owed by the deadline.

Find peace of mind come tax time

Educating yourself about eBay taxes is the first step to preparing for a stress-free filing experience. Ease your tax season anxiety with QuickBooks accounting software that helps you keep your documents organized all year long, savings accounts that support your self-employment goals, and the resources you need to succeed. These tools can help you maximize tax deductions and report eBay sales on your tax forms the right way.

Disclaimer: This content is for information purposes only and the information provided should not be considered legal, accounting, or tax advice or a substitute for obtaining such advice specific to your business. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable for dealing with a customer’s particular situation. Intuit Inc. does it have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. Intuit Inc. cannot warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Readers should verify statements before relying on them.

Disclaimer: Intuit Assist and certain other AI features and functionalities are currently available at no additional cost to certain QuickBooks users. Pricing, terms, conditions, special features, and service options are subject to change without notice. Intuit reserves the right to discontinue the feature at any time for any reason in its sole and absolute discretion.