Yes, you generally have to claim eBay sales on your taxes if you made a profit, but a lot of casual selling produces no taxable income at all. Selling used personal items for less than you paid creates a loss, and losses aren’t taxed. Profit is another story: how you report it, and how much you owe, depends on whether the IRS treats your selling as a business, a hobby, or a one-time cleanout of your closet.
Selling Used Personal Items at a Loss
This is the situation most casual sellers are actually in. You listed some old clothes, electronics, or furniture, and the sale prices were well below what you originally paid. A jacket bought for $80 and sold for $30 is a $50 personal loss, not income, and the IRS doesn’t tax losses.1Internal Revenue Service. What to Do With Form 1099-K
You can’t deduct the loss either. Personal losses aren’t deductible, so the tax result is simply nothing: no income, no deduction, nothing to file. The only complication is if eBay sends you a Form 1099-K reporting those sales. In that case, the IRS has been told money moved through your account, and you need to account for it on your return even though none of it is taxable.
There are two accepted ways to zero out a 1099-K for personal items sold at a loss. You can report the gross amount on Schedule 1 (Form 1040) with an offsetting entry that brings the net to zero. Or you can report the sales on Form 8949, entering the proceeds in column (d), your original cost in column (e), code “L” in column (f) to flag it as a nondeductible personal loss, and an adjustment in column (g) that zeros out the gain or loss.2IRS. Instructions for Form 8949 Either method works. The point is to show the IRS what the 1099-K represented without paying tax you don’t owe.
When eBay Income Becomes Taxable
Once you’re actually making money on eBay, the IRS classifies your activity as either a business or a hobby, and that single distinction controls almost everything else: which forms you file, whether you can deduct expenses, and whether you owe self-employment tax.
A business, for tax purposes, is an activity you pursue with a genuine intent to make a profit. A hobby generates income incidentally to something you do for enjoyment. The IRS weighs nine factors to decide which fits, and no single factor controls.3The Tax Adviser. Nine Factors That Determine Whether an Activity Is a Hobby Among them: whether you keep businesslike records, how much time and effort you invest, your expertise, your track record of profits and losses, and whether you rely on the income for your livelihood.
There’s a safe harbor worth knowing. If your selling activity turns a profit in at least three of the last five tax years, the IRS presumes it’s a business.4Office of the Law Revision Counsel. 26 U.S. Code 183 – Activities Not Engaged in for Profit Falling short of it doesn’t automatically make you a hobby seller; it just means the nine-factor analysis gets a closer look.
Why the Classification Matters
Business sellers report income and expenses on Schedule C, and the net profit flows to Form 1040.5Internal Revenue Service. About Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship) Every ordinary and necessary expense is deductible: eBay fees, shipping, packaging, what you paid for the inventory, mileage for sourcing, part of your internet bill. Those deductions reduce your taxable profit, sometimes dramatically. The trade-off is self-employment tax on the net.
Hobby sellers report gross income on Schedule 1 (Form 1040), line 8j, and cannot deduct any expenses against it.6Internal Revenue Service. Here’s How to Tell the Difference Between a Hobby and a Business for Tax Purposes The suspension of hobby expense deductions under the 2017 Tax Cuts and Jobs Act was made permanent by the One, Big, Beautiful Bill Act signed in 2025. If you sold $3,000 worth of goods as a hobby and paid $2,500 to acquire them, you owe tax on the full $3,000. Hobby income isn’t subject to self-employment tax, but for anyone with meaningful costs, losing the deductions usually outweighs that saving.
The 1099-K and What It Means
Form 1099-K is an information return that eBay sends to you and to the IRS. It reports the gross dollar amount of transactions run through your account. Receiving one does not mean you owe tax on the full amount. It means the IRS knows money moved, and expects your return to account for it.
The federal 1099-K threshold went through several planned reductions, then reverted under the One, Big, Beautiful Bill Act. For the 2026 tax year, eBay is only required to send you a 1099-K if your gross payments exceed $20,000 and you had more than 200 transactions.7Internal Revenue Service. IRS Issues FAQs on Form 1099-K Threshold Under the One, Big, Beautiful Bill Both conditions have to be met.
Two things to know. Some states set lower thresholds, so you might get a 1099-K even below the federal line. And your tax obligation exists independently of the form. If you earned taxable profit on eBay, you owe tax on that profit whether or not a 1099-K ever arrives.
Figuring Your Taxable Profit
Taxable profit is not the gross number on a 1099-K. It’s total sales minus what you paid for the goods and every other legitimate business expense. Failing to track those costs is the single most common way sellers overpay.
Cost of Goods Sold
Cost of goods sold is what you paid to acquire the items you sold, plus any costs to get them ready for sale. A vintage camera you bought for $75 and cleaned up with $10 in parts has an $85 COGS. Sell it for $200 and your gross profit is $115. You need documentation for every purchase, which is why keeping receipts from the start matters.
Most eBay sellers can use the cash method of accounting and skip formal inventory tracking, treating goods as non-incidental materials and supplies and deducting the cost in the year they sell the item.8Internal Revenue Service. Publication 538, Accounting Periods and Methods
Other Deductible Expenses
Beyond COGS, business sellers can deduct all ordinary and necessary operating costs. Common ones include:
- eBay fees: listing fees, final value fees, promoted listing fees, store subscriptions
- Shipping: postage, carrier fees, insurance you pay yourself
- Packaging: boxes, tape, bubble wrap, poly mailers, labels
- Mileage: trips to the post office, thrift stores, estate sales, and other sourcing runs at the IRS standard mileage rate
- Home office: a portion of rent or mortgage interest, utilities, and insurance if you have space used exclusively and regularly for eBay
- Technology: proportional share of internet, phone, listing or bookkeeping software
Each of these needs documentation. A spreadsheet estimate won’t survive scrutiny. Keep the receipts, bank statements, and mileage logs themselves.
Self-Employment Tax
If your eBay activity is a business and your net earnings exceed $400, you owe self-employment tax on top of income tax. It covers Social Security and Medicare, both halves, because you’re your own employer.9Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
The combined rate is 15.3%: 12.4% for Social Security on net earnings up to $184,500 in 2026, and 2.9% for Medicare with no cap.10Social Security Administration. Contribution and Benefit Base You calculate it on Schedule SE. You can deduct half of the self-employment tax when figuring adjusted gross income, which trims your income tax bill.
How to File Based on Your Situation
- Business seller: report gross income and expenses on Schedule C; net profit carries to Form 1040; calculate self-employment tax on Schedule SE.5Internal Revenue Service. About Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship)
- Hobby seller: report gross income on Schedule 1 (Form 1040), line 8j; no expense deductions, no Schedule SE.6Internal Revenue Service. Here’s How to Tell the Difference Between a Hobby and a Business for Tax Purposes
- Personal items sold at a loss: if you received a 1099-K, zero out the amount on Schedule 1 or Form 8949 as described above; if you didn’t receive one, there’s nothing to report.1Internal Revenue Service. What to Do With Form 1099-K
Estimated Quarterly Payments
If you expect to owe $1,000 or more in total tax for the year, you generally need to make estimated quarterly payments using Form 1040-ES.11Internal Revenue Service. Estimated Taxes For 2026, the deadlines are April 15, June 15, September 15, and January 15, 2027. Missing them or underpaying triggers a penalty even if you pay the full balance at filing time. First-year sellers often get caught by this because they’re used to employer withholding handling everything.
Records to Keep
The IRS expects documentation that supports every item of income, deduction, or credit for at least three years from the date you file. Underreport income by more than 25% and the window stretches to six. Never file and there’s no time limit at all.12Internal Revenue Service.