Most people selling on eBay owe no federal income tax, so the short answer to whether you have to pay taxes on eBay sales is: usually not, but sometimes yes. Tax is owed on profit, not on sales. If you’re clearing out used personal items for less than you originally paid, there’s no profit and no tax. If you’re selling items for more than they cost you, or buying inventory to resell at a markup, the picture changes.
What Actually Gets Taxed
The number that matters is your cost basis: what you originally paid for the item, plus anything you spent getting it ready for sale. Sell for less than your basis and you have a loss. Sell for more and you have a gain, and the gain is what the IRS taxes.
A used phone you bought for $800 and sold two years later for $250 produces a $550 loss. You don’t report it, and you can’t deduct it either. Federal law doesn’t allow deductions for losses on personal-use property.1Office of the Law Revision Counsel. 26 USC 165 – Losses This is the situation for most casual sellers, and it’s why most casual sellers owe nothing.
Taxable income shows up when the sale price beats your basis. Buy a vintage watch for $100 at a flea market, sell it on eBay for $900, and you have an $800 capital gain to report on Form 8949 and Schedule D. Hold the item more than a year before selling and you qualify for long-term capital gains rates, which top out at 20% for most assets. Collectibles are the exception worth flagging: coins, art, stamps, and antiques face a maximum long-term rate of 28%.2Internal Revenue Service. Topic No. 409, Capital Gains and Losses
Personal Seller, Hobbyist, or Business
The IRS sorts eBay activity into three categories, and the one you fall into drives which forms you file and whether your expenses count for anything.
Personal Sales
Clearing out your closet or garage is liquidating personal assets. Losses don’t matter; gains are taxable. Most casual sellers stop here and owe nothing.
Hobby Sales
Selling regularly without really trying to run a profitable operation puts you in the hobby bucket, which is the worst tax outcome of the three. You must report every dollar of gross hobby income on Schedule 1 of Form 1040 (line 8j), and you cannot deduct any of the expenses you incurred to earn it. There is no offset for inventory, shipping, or fees. The IRS looks at nine factors to decide hobby versus business, including whether you keep business-like records and depend on the income; an activity that shows a profit in three of the last five tax years is generally presumed to be a business.3Internal Revenue Service. Business or Hobby? Answer Has Implications for Deductions
Business Sales
If your primary purpose is profit and you operate with continuity and regularity, you’re running a business.4Internal Revenue Service. About Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship) You file Schedule C, deduct ordinary and necessary expenses against gross income, and owe self-employment tax on the net profit. For sellers who buy inventory to resell, this is usually the right category, and it’s the most favorable one because the deductions can dramatically reduce taxable profit.
The 1099-K Form and Why It Scares People
eBay must file Form 1099-K with the IRS for any seller whose gross payments exceed $20,000 and who has more than 200 separate transactions in a calendar year. Both conditions have to be met. Below either threshold, no federal 1099-K.5Internal Revenue Service. IRS Issues FAQs on Form 1099-K Threshold Under the One, Big, Beautiful Bill; Dollar Limit Reverts to $20,000
You may have heard about a $600 threshold. The American Rescue Plan Act of 2021 tried to drop the trigger to $600 with no transaction minimum. It was delayed repeatedly and never took effect. The One, Big, Beautiful Bill retroactively reinstated the $20,000-and-200-transaction threshold, so the $600 federal rule is off the table.6Internal Revenue Service. Form 1099-K FAQs: General Information Some states set lower thresholds of their own, so you could receive a 1099-K at the state level even when the federal rule wouldn’t produce one.
Here’s the part that trips people up: the gross amount on a 1099-K is everything buyers paid through the platform, including item price, shipping, sales tax, and fees. It is not reduced by refunds, eBay’s fees, shipping you paid, or what the item originally cost you.7Internal Revenue Service. Form 1099-K (Rev. March 2024) Payment Card and Third Party Network Transactions The number will almost always be far larger than your actual profit. Receiving a 1099-K does not mean you owe tax on the full amount shown.
What it does mean is that the IRS has a copy, and if the figure doesn’t appear somewhere on your return, automated systems will notice.
If You Got a 1099-K for Personal Items Sold at a Loss
This is the most common anxious-reader scenario, and the fix is procedural. You don’t owe tax, but you do need to show the IRS you accounted for the 1099-K.
On Form 8949, list each item, enter the sale proceeds in column (d), enter your cost basis in column (e), write “L” in column (f) to flag the loss as nondeductible, and enter a positive adjustment in column (g) that zeroes out the gain or loss in column (h). The IRS sees the 1099-K amount accounted for, and your taxable income doesn’t move.8Internal Revenue Service. 2025 Instructions for Form 8949
Documentation makes this work. Keep purchase receipts, credit card statements, or anything showing what you paid. Without proof of basis, the IRS could treat the entire sale price as a gain.
What Business Sellers Owe on Top of Income Tax
If your activity is a business, net profit on Schedule C is subject to self-employment tax in addition to regular income tax. Self-employment tax funds Social Security and Medicare, and you pay both the employer and employee halves because you’re both.
The combined rate is 15.3% (12.4% Social Security plus 2.9% Medicare), applied to 92.35% of net profit. You can then deduct half of the self-employment tax you paid as an adjustment to income, which reduces income tax but not self-employment tax itself.9Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) The Social Security portion only applies to net earnings up to $184,500 in 2026.10Social Security Administration. Contribution and Benefit Base An additional 0.9% Medicare surtax kicks in above $200,000 for single filers and $250,000 for joint filers.
You must file Schedule SE and pay self-employment tax once net earnings reach $400 for the year.11Internal Revenue Service. Topic No. 554, Self-Employment Tax That’s a low threshold; even a modest side operation crosses it quickly.
Deductions That Reduce the Bill
Business expenses on Schedule C reduce both income tax and self-employment tax, which is why tracking them matters. Deductible items include what you paid for the inventory you resold, eBay’s final value fees and listing fees, payment processing fees, shipping costs, packaging supplies, mileage to the post office and supply store at the 2026 standard rate of 72.5 cents per mile,12Internal Revenue Service. IRS Sets 2026 Business Standard Mileage Rate at 72.5 Cents Per Mile, Up 2.5 Cents and equipment like computers, cameras, scales, and label printers.
A home office qualifies if you use a defined space exclusively and regularly for the business. The simplified method pays $5 per square foot up to 300 square feet, capped at $1,500.13Internal Revenue Service. Simplified Option for Home Office Deduction The regular method deducts a percentage of actual home expenses based on business use.14Internal Revenue Service. Publication 587 (2025), Business Use of Your Home The exclusivity rule is strict: a kitchen table you also eat at doesn’t count.
Self-employed sellers not eligible for employer-sponsored health coverage can also deduct 100% of health, dental, and vision insurance premiums as an adjustment to income.15Internal Revenue Service. Instructions for Form 7206 Schedule C filers may additionally claim the Section 199A qualified business income deduction, worth up to 20% of qualified business income, with wage-and-capital limits that don’t begin phasing in until taxable income exceeds $201,750 for single filers or $403,500 for joint filers in 2026.
Quarterly Estimated Payments
eBay doesn’t withhold taxes, so if you expect to owe $1,000 or more for the year, you’re required to make quarterly estimated payments.16Internal Revenue Service. 2026 Form 1040-ES – Estimated Tax for Individuals The 2026 deadlines are April 15, June 15, September 15, and January 15, 2027. To avoid penalties, pay at least 90% of this year’s liability or 100% of last year’s tax, whichever is less (110% of last year’s if your prior-year AGI exceeded $150,000).17Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty The current IRS underpayment interest rate is 7%, so skipping payments on a profitable account gets expensive.18Internal Revenue Service. Interest Rates Remain the Same for the First Quarter of 2026
Records to Keep
For business sellers, that means every purchase receipt, fee statement, shipping cost, and a contemporaneous mileage log showing date, destination, business purpose, and miles. Reconstructing mileage from memory at tax time is exactly what the IRS rejects in an audit.
For casual sellers, keep proof of what you paid for the items you’re reselling. If a 1099-K ever lands in your mailbox, those receipts are what let you show the sales were losses rather than income.
The IRS generally expects you to keep records supporting a return for three years from the filing date, stretching to six years if you underreport income by more than 25%.19Internal Revenue Service. How Long Should I Keep Records eBay’s Seller Hub provides transaction history, but download and back up your own copies; account closures and policy changes can leave you without access.
Sales Tax Is Not Your Problem
Sales tax is separate from income tax, and for eBay sellers it’s handled by eBay. Nearly every state with a sales tax has marketplace facilitator laws that shift collection and remittance to the platform. eBay calculates tax on the buyer’s shipping address, adds it to the buyer’s total, and sends it to the state. The money never touches your account and isn’t part of your income. The only time sales tax becomes your responsibility is if you also sell through channels that aren’t covered by a facilitator, like your own website or in-person sales.