Both hobby and business income on eBay are generally taxable, but they are treated differently by the IRS. Profits from selling personal items (hobby) are taxable, while regular, profit-motivated sales (business) are taxable on net income. If you sell over $ 5 , 000 $ 5 , 0 0 0 in 2024 (or $ 600 $ 6 0 0 in 2026), you will likely receive a 1099-K.
Hobby sales must be reported
If you and the IRS classify your eBay sales as a hobby, you'll have to report the income on Form 1040.
The federal self-employment tax is 15.3%, so you could save money if your income from an activity or pastime qualifies as hobby income. And if your activity generates less than $400 in 2025, you don't need to pay self-employment taxes, even if your income doesn't qualify as hobby income.
You must report any profit from eBay sales as taxable income, regardless of the amount, but for tax year 2025 and beyond, eBay sends a Form 1099-K to sellers who have over $20,000 in gross payments from more than 200 transactions, a return to the old threshold, making detailed record-keeping crucial for tracking profits and expenses for all sales, whether you get a form or not.
When you can ask eBay to step in. Once the buyer has let you know that they have an issue, you have 3 business days to respond with a resolution. After that, if the matter hasn't been resolved, either of you can ask us to step in and help.
The "3-year hobby rule," or IRS Hobby Loss Rule, is a tax guideline stating that if an activity makes a profit in three out of five consecutive years, the IRS presumes it's a legitimate business for tax purposes, not a hobby, allowing for business expense deductions; otherwise, it's presumed a hobby, and losses can't offset other income. The IRS examines factors like business-like operations, expertise, and time spent, but the profit test is a strong indicator, with exceptions for horse-related activities (2 of 7 years).
These factors are whether:
The taxpayer puts time and effort into the activity to show they intend to make it profitable. The taxpayer depends on income from the activity for their livelihood. The taxpayer has personal motives for carrying out the activity such as general enjoyment or relaxation.
Key takeaways
Whether or not you have to pay income taxes on eBay sales depends on the nature of your sales. If your eBay gross sales add up to more than $20,000 and 200 transactions in a year, eBay will send you a Form 1099-K, which lists the total amount of payments you received throughout the year.
Not all sales are taxed. Occasional sales of second-hand items do not necessitate reporting, especially when such items are sold for less than the original purchase price. However, if selling on eBay is done regularly for profit, the IRS considers it a business. So, income should be reported.
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.
In general, anyone who distributes goods or services may be considered a small business, and there are several ways to operate as such. The primary difference between a hobby and a business in the United States, according to the IRS, is that a business actively tries to earn a profit while a hobby does not.
Reselling is the best hobby, side hustle, second job, part-time job, or full-time job. Selling thrifted items on places like eBay, Poshmark, Depop, and Mercari is easy. There's very little money required up front for inventory. There are no fees until you sell your items.
Three-of-five test is a rebuttable IRS presumption that a business venture that does not make a profit during three out of the last five consecutive years of operation is a hobby and is not a business for the purposes of assessing tax - per [Section 183 (d)].
The $3,000 capital loss rule lets you deduct up to $3,000 (or $1,500 if married filing separately) of net capital losses against your ordinary income, like wages, after offsetting any capital gains. If your total loss exceeds this limit, you can carry the unused portion forward to future tax years indefinitely, reducing future gains or ordinary income, according to the IRS instructions for Schedule D (Form 1040) and IRS Topic No. 409.
What's Changing. Starting August 27, 2025, items valued at US$500 or above (including shipping fee) for shipping to the United States will require additional seller enablement on eBay. Note: This updates our prior threshold of US$2,500; all other terms remain the same.
As a UK resident, when you sell over £1,707 or more or complete 30 or more sales transactions within a calendar year, eBay is obliged to report certain personal or business information to HMRC in accordance with the UK digital sales reporting legislation. eBay will notify you when you have crossed these thresholds.
Registration of new accounts in order to circumvent sales limits on eBay is prohibited. In this case, all of your accounts may be suspended indefinitely. If you have more than one seller account, you may also be able to raise your limits by linking to your other, more established seller account.