---
title: "Do You Have to Pay Taxes on Reselling in 2026? The US Reseller Tax Guide"
url: https://shopfront.app/blog/us-reseller-tax-guide-2026/
published: 2026-04-09T00:00:00.000Z
updated: 2026-04-09T00:00:00.000Z
licence: "© Shopfront. All rights reserved. Cite with attribution."
---

## The $600 threshold is dead — the federal number is back to $20,000

If you have read almost any reselling tax article in the last few years, you were told that the IRS would start sending Form 1099-K to anyone who took more than $600 through eBay, Depop, Poshmark or any other platform. As of 2026, that is no longer true — and most articles still showing $600 are simply out of date.

The One Big Beautiful Bill Act (OBBBA), signed in July 2025, restored the federal Form 1099-K reporting threshold to its pre-2021 level: a platform only has to issue you a 1099-K once you exceed **more than $20,000 in gross payments AND more than 200 transactions** in a year. Both conditions have to be met. The IRS confirmed this in IR-2025-107 and its updated 1099-K FAQs on 23 October 2025, and it applies to 2025, 2026 and beyond.

The phased-down schedule everyone braced for — $5,000 for 2024, $2,500 for 2025, then $600 — came from the American Rescue Plan, and it has been cancelled. So the headline for casual sellers is simple: at the federal level, you are back to the old, much higher bar.

That is the good news. The rest of this guide is about the part that did not change: whether you actually owe tax, which is a separate question from whether you get a form.

## A 1099-K is not what makes income taxable

This is the single most misunderstood point in reselling tax, so it is worth stating plainly: **all income is reportable regardless of whether any form is issued.** The $20,000 / 200-transaction threshold only governs when the _platform_ is required to send you (and the IRS) a 1099-K. It has nothing to do with whether your profit is taxable.

In other words:

- Crossing the threshold does not create a tax bill on its own.
- Staying under the threshold does not make your profit tax-free.

The 1099-K is a paperwork trigger for the marketplace. Your obligation to report income exists either way. What changes your actual tax is _why_ and _how_ you are selling — which brings us to the three situations almost every reseller falls into.

## State rules can be much lower — check yours

The federal rollback to $20,000 does **not** change individual state rules, and several states require a 1099-K at far lower levels. As of 2026, these states are well below the federal bar:

- **Vermont, Massachusetts, Virginia, Maryland** — $600, with any number of transactions.
- **Illinois** — over $1,000 AND 4 or more transactions.

So a casual seller in one of those states can still receive a 1099-K well under the federal $20,000, even though no federal form would have been issued. This list can change, so treat it as a starting point: the federal threshold is $20,000 and 200 transactions, but **your state may be lower — verify the current list with your state revenue department.**

## The three situations: selling at a loss, hobby, and business

### 1. Selling your own stuff at a loss

If you are clearing out a wardrobe or a garage and selling personal items for **less than you paid for them**, there is no taxable income — you have a loss, not a gain. The catch: that loss is **not deductible** either. You cannot use the $40 you "lost" on an old jacket to offset other income.

If you sell only at a loss but still receive a 1099-K (for example, because you live in a $600-threshold state), you do not ignore it. Report the 1099-K gross amount at the top of **Schedule 1 (Form 1040)** as other income, then enter an **equal offsetting adjustment** to zero it out. The form is accounted for, and you owe nothing.

### 2. Selling your own stuff at a gain

Occasionally a personal item sells for **more than you paid** — a collectible, a sneaker that appreciated, a vintage piece. That profit is a **reportable capital gain**, even if it is a one-off and even if you never receive a form.

### 3. Hobby vs business

Once you are buying things specifically to resell, you are in one of two buckets, and the difference is real money:

- **Hobby** — occasional, not run for profit. Income goes on **Schedule 1 as other income**. It is subject to income tax but **not** self-employment tax. The downside: you **cannot deduct** your expenses or losses against it.
- **Business** — ongoing, with a genuine profit motive. You report on **Schedule C**, and you **can deduct** cost of goods sold, supplies, mileage, platform fees and a home-office allowance. Once your **net profit is $400 or more**, you owe **self-employment tax (~15.3%)**, you are required to file, and you may need to make **estimated quarterly payments**.

The business path involves more paperwork, but for anyone running real volume it almost always works out better, because you are taxed on _profit_ after expenses rather than on gross income.

## Worked example: the reseller vs the declutterer

Two people, two very different outcomes.

**The reseller.** You source inventory to flip and, after a year, your net profit is **$5,000** (that is sales minus cost of goods, fees, shipping and supplies). You file **Schedule C**. You owe:

- Income tax on the $5,000, at your marginal rate.
- Self-employment tax of about 15.3% on that profit — roughly **$700** (the 15.3% applies to 92.35% of your net earnings, not the full amount).

So on $5,000 of profit, the self-employment portion alone is around $700, and income tax sits on top depending on your bracket. This is exactly why tracking deductible expenses matters: every dollar of legitimate cost you record is a dollar that is not taxed.

**The declutterer.** You sold **$3,000** of old clothes over the year, all for less than you originally paid. Even if a 1099-K shows up for that $3,000 (say you are in a low-threshold state), you owe **nothing**. You report the gross on Schedule 1 and zero it out with an offsetting adjustment, because every item was sold at a loss.

Same dollar figures in the same ballpark, completely different tax — because one is profit-seeking inventory and the other is personal property sold at a loss.

## Keep clean records, whatever bucket you are in

The thing that makes any of this manageable is knowing your numbers per item: what you paid, what you sold it for, and what the platform took in fees. Marketplace fees are a deductible business expense, and they are also the difference between your headline sale price and your actual payout.

If you want to see what you really clear after fees on a given sale, our [eBay Fee Calculator](/ebay-calculator/) and [Poshmark Fee Calculator](/poshmark-calculator/) break down the fee math platform by platform, which is the same record you will want at tax time.

## FAQ

**Do I have to report income if I never get a 1099-K?**
Yes. All income is reportable regardless of whether a form is issued. The $20,000 / 200-transaction threshold only decides whether the platform must send a 1099-K — it does not decide whether your profit is taxable.

**Is the 1099-K threshold really $20,000 again in 2026?**
At the federal level, yes. The OBBBA restored the threshold to more than $20,000 in gross payments and more than 200 transactions, and the IRS confirmed this on 23 October 2025. Note that some states set their own lower thresholds (as low as $600), so you may still receive a form well under the federal bar.

**I sold my old clothes at a loss but got a 1099-K. What do I do?**
Do not ignore it. Report the 1099-K gross amount at the top of Schedule 1 (Form 1040), then enter an equal offsetting adjustment to zero it out. You owe no tax on personal items sold at a loss, but that loss is not deductible either. Our [guide to what to do when you get a 1099-K](/blog/got-a-1099-k-what-to-do/) walks through it step by step.

**When do I owe self-employment tax?**
When you are running as a business (ongoing, profit motive) and your net profit is $400 or more. At that point self-employment tax of roughly 15.3% applies, you are required to file, and you may need to make estimated quarterly payments.

**Hobby or business — how do I know which I am?**
Broadly: a hobby is occasional and not run for profit, while a business is ongoing with a genuine profit motive. The practical difference is that a business files Schedule C and can deduct expenses, while a hobby reports income on Schedule 1 and cannot deduct anything. If you are sourcing inventory to flip, you are very likely a business.

## A note for sellers outside the US

If you are reselling in the UK, the rules and the reporting body are completely different — see our [UK reseller tax guide for 2026](/blog/uk-reseller-tax-guide-2026/) for HMRC's trading allowance and the side-hustle reporting rules.

## Disclaimer

This article is general information, not tax advice. Tax outcomes depend on your individual circumstances, your state, and how you sell. For anything specific to your situation, consult the IRS, your state revenue department, or a qualified accountant before you file.