An illustration of a computer, calculator, and clipboard, representing items you'll need to calculate eBay taxes.

How to report eBay sales on taxes

Do you need to report eBay sales on taxes?

If you sell on eBay as a hobby or business, you need to report that income on Form 1040 when you file taxes. If you earned over $20,000 and had more than 200 transactions in 2023, those sales will be reported by eBay to you and to the IRS on Form 1099-K. If you only sell items occasionally at a loss, then you don’t need to report sales on your taxes.

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.

eBay tax basics

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 through tax season. Here are the basics you should know about reporting income from eBay:

  • You need to report eBay income with Form 1040 and 1099-K 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 reported income
  • If you occasionally sell used items, you likely don’t need to report income, especially if items are sold at a loss
  • If you’re earning $20,000 or more and have more than 200 transactions those sales will be reported to you by eBay on Form 1099-K for the 2023 tax year

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

A flowchart to determine where you need to report your eBay sales and whether eBay will send you a Form 1099-K.

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

Although you need to report all profits and/or income from a hobby as well as a business, you’ll first need to determine whether you can report your sales as a hobby or a business so that you can claim the appropriate deductions, losses, etc.

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?

An illustration of how to calculate your eBay sales.

Will eBay send a 1099-K?

If you meet both the following criteria for the previous year, then eBay will automatically send you Form 1099-K by Jan 31: 

  • Made over $20,000 in unadjusted gross sales income in a year
  • Had over 200 transactions.

Even if you don’t receive a 1099-K automatically, you still need to report any income you earn on eBay to the IRS on Form 1040.If your eBay payments are processed elsewhere, such as PayPal, you should receive a Form 1099-K from that processor if you meet the same criteria.

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.

How to file taxes as an eBay seller

eBay sellers will generally need to report income on Form 1040. The process is different if your sales are a hobby or business:

If your eBay sales are a hobby:

You need to report expenses related to your hobby income on Form 1040, using Schedule A for itemized deductions. Your hobby income from sales on eBay will be reported on Schedule 1 of your Form 1040. Since your activities are considered a hobby, you won’t be able to claim losses. For deductions, you can claim expenses, such as eBay fees, shipping, packing, and mileage to bring down your net income.

You need to report income from eBay on Form 1040 and will not be able to deduct expenses. If you have more than $20,000 in sales, your total sales from eBay will be reported to you on Form 1099-K, a tax form that specifically covers credit, debit, and third-party online transactions. If you have less than $20,000 in third-party transactions, you will not receive a Form 1099-K for the 2023 tax year. 

You might have heard about a new $600 threshold for third-party transactions, like payments made through Venmo and Paypal. What does this mean? There are plans to slowly lower this minimum to $600, starting with a $5,000 minimum for the 2024 tax year.

If your eBay sales are a business:

If you’re selling on eBay as a business, keep a paper trail of expenses and income and report your net income on Schedule C. Schedule C is for self-employed people who don’t have bosses who withhold taxes for them. Even if you’re employed part-time or full-time elsewhere, you’ll still need to fill out the Schedule for your eBay activities. To do this, you need to take the following steps:

  • Keep a record of business expenses 
  • Keep a record of your business profits
  • Subtract expenses from profits to get your net income

If you’ve made over $400 in net profit from your eBay sales, you’ll also need to fill out Schedule SE to figure out how much you owe in self-employment taxes.

Possible deductions include inventory costs, shipping fees, eBay and PayPal fees, travel expenses, software, as well as office expenses. Note that you can only claim home office expenses if you use the space exclusively for your eBay activities. 

The same rules for reporting income on a 1099-K Form apply, whether you’re considered a business or hobby. You will receive a 1099-K form from eBay if your sales are more than $20,000. 

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. With these tools, you can maximize tax deductions and report eBay sales on your tax forms the right way.

With QuickBooks, get every tax deduction you deserve.

How to report eBay sales on taxes FAQ

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