If you're selling items for less than what you bought them for, you won't get to take money off your taxes. But, if you made money on your sale(s), you'll report it to the IRS on Form 8949 and Schedule D.
If you sell something created or acquired as a hobby online, the profit you earn is taxable income that is supposed to be reported on your tax return.
Profit on business products and services is taxed as ordinary income. However, when you sell a personal item for more than you paid or sell a business asset that has gained value, you will likely need to report the profit as capital gains. You may owe taxes based on the capital gains tax rates for that period.
Whether or not you receive a Form 1099-K, you must still report any income on your tax return. This includes payments for any: Goods you sell, including personal items such as clothing or furniture. Services you provide.
On the other hand, if you resell items regularly and for a profit, you'll need to report those earnings on Schedule C of your tax return. The money you make will be subject to federal (and possibly state) income tax.
The new "$600 rule"
Under the new rules set forth by the IRS, if you got paid more than $600 for the transaction of goods and services through third-party payment platforms, you will receive a 1099-K for reporting the income.
Generally, you must pay self-employment taxes if your net profits are $400 or more. Self-employment taxes are Social Security and Medicare taxes. Use Schedule SE with your tax return to help you determine how much tax to pay.
Do You Have to File Taxes If You Made Less than $5,000? Typically, if a filer files less than $5,000 per year, they don't need to do any filing for the IRS. Your employment status can also be used to determine if you're making less than $5,000.
Key Takeaways:
Gifts of up to $19,000 in cash are exempt from reporting in 2025. Those who have household employees must report cash payments that exceed $2,800 in 2025. All cash income should be reported on federal tax returns, regardless of whether a person receives a W-2 or 1099 Form from the entity that paid them.
Payment apps and online marketplaces might issue a Form 1099-K, informing you and the IRS of how much money you got for selling things or providing a service. If you make a profit through these activities, it's considered taxable income.
For example, money from odd jobs, baby-sitting, or a one-time “gift” if it is not more than $30 in three months [7 C.F.R. § 273.9(c)(2); MPP § 63-502.2(d)]; or severance pay (unless paid out in regular installments) or vacation pay at termination of job, which should be treated as a lump sum.
Gifts Are Not Income
You won't owe the IRS a gift tax, either, if your grandmother gives you a non-cash gift. However, you might owe this tax if you decide to give the gift away or if you sell it for significantly less than its fair market value.
With the rise of online marketplaces, becoming an online reseller has never been more accessible—similar to making money as an influencer. By mastering the art of reselling, you can turn a side hustle into a thriving business and learn how to make money reselling effectively.
For example, if you bought a used car for $1,000 and later sold it for $5,000, you will need to pay taxes on the profit as capital gains during tax season. Depending on the value and your tax bracket, if you have owned the car for more than a year, the taxes may range from 0% to 20% or higher depending on the state.
Generally, you must include in gross income everything you receive in payment for personal services. In addition to wages, salaries, commissions, fees, and tips, this includes other forms of compensation such as fringe benefits and stock options.
The lingering impacts of the pandemic, including changes in income sources, tax relief expirations, and new legislation, have all contributed to changes in tax liability. These factors might explain why you owe taxes in 2024.
If you made a profit or gain on the sale of a personal item, your profit is taxable. The profit is the difference between the amount you received for selling the item and the amount you originally paid for the item.
Do I Need an LLC? If you are making and selling handmade products yourself, you are a sole proprietor—any profits you make you include on your personal income tax form. However, there is no liability protection as a sole proprietor. If someone is injured and wants to sue, they can go after you personally.
Is hobby income taxable? The IRS requires you to report all your income; hobby income is no exception. You pay taxes on your income whether you profit from a hobby or a business. However, one key difference is that taxpayers with hobby income (not considered business income) can avoid self-employment taxes.
Payments you collect on the Cash App only count as income if you received them in exchange for goods or services. In contrast, personal payments between friends and family don't count, and you don't have to report them on your taxes.
Your earned money from selling on Marketplace could be subject to taxes. Even if you don't claim the income when you file your annual taxes, we will submit a Form 1099 and report your income to the IRS.
For tax year 2025, the threshold is $2,500, regardless of the number of transactions. For tax year 2026 and after, the threshold is $600, regardless of the number of transactions.