Ask the Expert: How do I report income from eBay sales?
The threshold for reporting income from sources like eBay has decreased from $20,000 to $600. Based on what I've read, I'll have to pay tax on any profit on household goods I sell, but cannot take a loss on similar items if they're unsalable. Can you clarify this?
You have a reprieve. The Internal Revenue Service has announced it will delay implementation of the new $600 reporting threshold to give people time to prepare for it.
Keep careful records of your 2023 payments from third-party platforms, like eBay. In January 2024, you’ll receive copies of the 1099-Ks they send the IRS, reporting payments to you of $600 or more. Check that the amounts listed match your records. If not, ask the third-party network to issue a corrected 1099.
As for deducting losses, are you selling items on eBay as a hobby or as a business?
If this is a business, you’ll report your gross income on Schedule C, Profit or Loss From Business, where you can subtract associated expenses to determine your net income or your loss. You must also complete Schedule SE and pay self-employment tax on net income of $400 or more.
If it's a hobby, report the income on Schedule 1 of Form 1040. Income from a hobby isn't subject to self-employment tax. And expenses associated with a hobby aren't tax deductible.
So what's the difference between a business and a hobby? If you’re engaged in the equivalent of an occasional yard-sale at which you're unloading gently used personal items, it's probably a hobby. But if you buy items you hope to resell at a profit throughout the year, it's a business.
The bottom line
Taxpayers have always been required to report all their taxable income, whether or not they receive a Form 1099-K.
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