Selling Personal Items Online

Key Takeaways

• Casual vs. business sales: The IRS makes a distinction between infrequent personal sales and ongoing sales conducted for profit; those who sell regularly may be classified as operating a business.
• Personal item sales: Tax is only owed when you sell an item for more than what you originally paid—losses on personal items cannot be deducted.
• 1099-K thresholds restored: Under the One Big Beautiful Bill Act (OBBBA), you'll only receive a 1099-K if you exceed $20,000 in payments and 200 transactions per year, with this standard made retroactive to 2022.
• Casual sellers unaffected: Most people selling personal belongings on platforms such as eBay, Venmo, or Facebook Marketplace won't receive a 1099-K unless their selling activity is significant.
• Reporting gains: Sales that result in profit must be reported on Schedule D (Form 1040); the applicable tax rate depends on the length of time the item was held.
• Recordkeeping matters: Maintain purchase receipts and sale documentation to establish cost basis, confirm 1099-K accuracy, and demonstrate whether gains are subject to tax.

Online sales of personal items have grown increasingly popular. Numerous individuals utilize platforms such as eBay, Facebook Marketplace, OfferUp, or Poshmark to sell belongings they no longer need, including clothing, electronics, or furniture. While disposing of a few personal items may appear simple, tax considerations come into play. Knowing when and how taxes apply to these transactions can prevent unexpected issues and help maintain compliance with IRS requirements.

Selling Personal Items vs. Operating a Business

The IRS makes a distinction between occasional sales of personal property and business operations. Selling personal items typically involves disposing of possessions that were bought for personal use, not for resale purposes. For instance, if someone sells a used laptop they no longer need, this qualifies as a personal sale. However, if they consistently purchase discounted laptops to resell at a profit, they may be viewed as running a business.

The primary factors the IRS evaluates when determining business activity include how often sales occur, whether there's an intent to profit, and the degree of involvement in sales-related tasks. Sporadic sales of personal property don't qualify as a business, but regular and systematic sales indicate business income.

When You Owe Taxes on Personal Item Sales

Selling a personal item usually doesn't create taxable income when it's sold for less than what you originally paid. This occurs because there's no gain to report. However, if a personal item is sold for more than its original purchase price, the difference represents a capital gain and may be taxable.

For instance, if someone purchases a collectible watch for $500 and later sells it for $1,000, they realize a capital gain of $500. This gain needs to be reported on their tax return, and the tax rate that applies depends on how long they held the item. If they owned the watch for more than a year, the sale qualifies for long-term capital gains tax rates, which are more favorable than ordinary income tax rates. If they sold it within a year of purchase, the gain is taxed as short-term capital gains, which are taxed at regular income tax rates.

Personal losses, however, cannot be deducted. If someone purchases a couch for $1,200 and later sells it for $400, they cannot deduct an $800 loss on their tax return. The IRS doesn't permit deductions for losses on the sale of personal-use property.

Form 1099-K and the New Reporting Thresholds

Recent legislation under the One Big Beautiful Bill Act (OBBBA) has reinstated higher reporting thresholds for Form 1099-K, which payment platforms such as PayPal, Venmo, and eBay use to report transactions to the IRS.

Under the updated law, you'll only receive a 1099-K if you receive more than $20,000 and complete more than 200 transactions in a year. The OBBBA permanently eliminated the planned lower thresholds ($2,500 in 2025 and $600 in 2026) and applied the higher standard retroactively to 2022.

This means most casual online sellers, individuals selling personal items or using payment apps for small, infrequent sales, won't receive a 1099-K unless their activity is regular and significant. However, all taxable income must still be reported, regardless of whether you receive the form.

For instance, if you sell $3,000 worth of used electronics but originally paid $4,500, you won't owe tax or receive a 1099-K. But if you consistently sell items for profit, that income may be treated as business income and must be reported.

Even with the higher threshold, maintaining good records is crucial. Document what you paid and received for each sale, and keep receipts or documentation in case the IRS requests verification. If you do receive a 1099-K, keep in mind it reports total payments, not profits—so you'll need to account for your original costs and any deductible expenses.

In summary: the OBBBA maintains the $20,000 and 200 transactions threshold going forward. While this relieves most casual sellers from additional paperwork, it doesn't eliminate the obligation to report income or keep accurate records.

How to Report Personal Item Sales on Your Tax Return

If a personal item is sold at a profit, it must be reported on Schedule D of Form 1040, which handles Capital Gains and Losses. The original purchase price is deducted from the sale price to calculate the taxable gain.

For instance, if someone sells a rare book for $800 after buying it for $200, they report a $600 gain on Schedule D. If they had owned the book for more than a year, they qualify for the more favorable long-term capital gains tax rates. However, if they sold it within a year of purchase, the gain is taxed at ordinary income tax rates.

If a seller receives a 1099-K but has no taxable income because all sales resulted in losses, they should still report the transactions. This prevents the IRS from incorrectly assuming the entire amount is taxable. In these situations, they can report the total sales proceeds and the corresponding cost basis to demonstrate no taxable gain.

Tips for Avoiding Tax Surprises

Maintaining detailed records of purchases and sales is crucial for demonstrating whether a gain exists. This involves keeping receipts, credit card statements, or any documentation that shows the original cost of items. If records are missing, reasonable estimates based on comparable items can sometimes be utilized.

Differentiating between personal sales and business activity is also critical. If a seller regularly participates in sales with the intent to profit, they should report the income as business revenue and may be obligated to pay self-employment taxes. Understanding state sales tax obligations is another important factor. Some states, including California and Washington, require sellers to collect and remit sales tax on transactions, even for personal items.