Online selling has become increasingly common, whether it's reselling used items or starting a side business. Platforms like Facebook Marketplace, Etsy and eBay make it easy to list items for sale and accept payments online.
But IRS rules around online payments have shifted over the years, creating confusion. Form 1099-K thresholds and reporting requirements can change from year to year, leaving you feeling unsure about what you need to report. Receiving a tax form doesn't necessarily mean you owe money; it just means you need to report your activity accurately.
Taxes for online sales depend on many different factors, including what you sell, how much you sell and whether the sales are personal or business-related. H&R Block provides tools and guidance to help online sellers understand how their sales are taxed and how to report them correctly. It's also the CNET Editor's Choice for best overall tax software this year.
If you received income via Venmo, PayPal or another online source, understanding Form 1099-K will make tax filing season a bit easier.
How online selling is tracked for tax purposes
If you sell items online and receive payments, those payments may be reported to the IRS using Form 1099-K. This form is used to report payments you receive through third-party networks, like online marketplaces or payment apps. Income you receive through apps like PayPal and Venmo, or platforms like eBay and Etsy may still need to be reported on your tax return, even if you don't receive a Form 1099-K.
For the 2025 tax year, you'll receive Form 1099-K if you received more than $20,000 in payments and had more than 200 transactions during the year from a platform. However, any income you earn from your online sales may need to be reported on your tax returns, even if you don't receive a tax form. That's because a 1099-K simply reports payments processed throughout the year that exceed the reporting threshold. You may receive more than one Form 1099-K if you meet the threshold form more than one platform or payment processor.
Whether or not you owe taxes depends on your profits, regardless of whether the sales were personal or business-related. The 1099-K reporting rules have changed in recent years; H&R Block provides help to navigate current IRS thresholds and reporting requirements.
Do you need to report income if you sold items online?
Online sales tend to fall into one of three categories, and each affects when and how you report that income.
Reselling personal items
If you're reselling personal items, those sales may not be taxable if you sell them for less than you originally paid. For example, let's say you bought a couch for $1,200 a few years ago. When you move, you decide to sell it on Facebook Marketplace for $350. Because you sold the couch for less than what you originally paid, there's no taxable profit. However, you also can't claim it as a loss. If you sell a personal item for more than you paid for it, the profit needs to be reported on your tax return.
Selling online as a hobby
Some people choose to sell items online casually, such as selling handmade goods or listing items infrequently. You're not actively trying to build a business, and your goal may not be to earn consistent income. This is considered hobby income.
Even so, money you earn casually on the side counts as taxable income and needs to be reported to the IRS. Whether you'll end up owing taxes on that income depends on whether you made a profit.
Running an online business
If you're selling items regularly with the goal of earning income, you're likely considered to be running an online business for tax purposes. In this case, you need to file a Schedule C with your tax return, report your gross income and business expenses and pay self-employment taxes. If you're unsure which category you fall into, H&R Block can help you determine how to report your online sales.
If you sold items online for a profit, assume that you will need to report this income.
What deductions can offset online selling income?
Online businesses have more reporting requirements, but they also qualify for more deductions, which can help reduce your taxable income. According to the IRS, business expenses must be ordinary and necessary for your work. Here are some examples of expenses that may qualify:
- Platform fees: Listing fees, transaction fees and commissions charged by marketplaces.
- Shipping costs: Postage, shipping labels and delivery services.
- Packaging materials: Boxes, envelopes, tape, labels and protective packaging.
- Inventory costs: Materials or products purchased specifically to resell.
- Home office expenses: The portion of your home that's used regularly and exclusively for business.
In comparison, casual sellers may have more limited deduction options. If you sell personal items, you can usually reduce any taxable profit by your original purchase price, also known as your cost basis. For example, if you bought an item for $100 and sold it for $140, only the $40 profit is potentially taxable.
Personal losses aren't deductible, and you generally can't claim expenses like shipping or platform fees unless you're operating as a business.
Getting help when online selling taxes get complicated
Online selling taxes can get confusing, especially when you're dealing with income from multiple marketplaces or payment apps. Many sellers are also unclear about whether their sales constitute a business or have questions about new or changing IRS reporting rules.
Sellers who use platforms like Facebook Marketplace often choose H&R Block because it offers filing options designed to handle seller income and payment reporting. Even sellers with under $20,000 in online sales and 200 transactions may benefit from tax guidance if they're unsure whether those profits are taxable or how to report income that didn't trigger a tax form.
H&R Block offers online filing options for sellers who want to file on their own, along with tools that support multiple Form 1099-Ks from different platforms in a single return. For more complex situations, you also have the option to work one-on-one with a tax professional.