Are you required to report your eBay profits on your tax return?

by kamckinley on February 12, 2007

If you sell items on eBay for a profit, then you may owe income taxes on your eBay sales. It doesn’t matter if it’s just a hobby or if you are trying to build a business.

Generally, any income you receive from all sources is subject to income tax unless it is specifically exempt by law (hint: eBay profits are not exempt).

You must file a tax return if your net earnings from self employment are $400 or more.  You are self employed if you carry on a trade or business for profit.  If you sell on eBay, you are generally trying to make a profit.

To report your eBay earnings on your tax return, file Form 1040, and attach Schedule C or C-EZ.  Schedule C is used to calculate your net profit or loss from your business, which is then reported on your Form 1040.

At this point, you may be thinking “I don’t run a business; I just sell on eBay as a hobby”.  Unfortunately, income from hobbies is taxable as well.  Even worse, you can only deduct expenses up to your hobby income, which means losses are not deductible.  For more on this topic, please read ‘Is your eBay activity a hobby or business?‘.

There is a common misconception that if you did not receive a 1099 or W-2, you are not required to report your income.  This is not true.  All income is reportable, regardless of whether you receive a form or not.  EBay is only a facilitator of the auction, therefore you will not receive a 1099 from eBay reporting your sales.

For more great eBay tax tips, please read our free special report, Tax Tips for eBay Sellers.

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KevinL February 23, 2007 at 8:24 am

What if I am just selling my old junk on ebay? For example I have some CD’s that I bought for about $14 each but I sell them on ebay for $2 or $3. I haven’t actually made a profit, so this is not business income. Would it be a business loss in this case?

Kristine February 23, 2007 at 3:34 pm

Thanks for the question! If you have an actual business – see my post ‘Is your eBay activity a hobby or a business’ – then your losses could be deductible. If you’re just selling on eBay as a hobby, then it will not be deductible. The IRS wants you to report hobby income, but they don’t allow you to take a loss from a hobby on your tax return. Hope that helps!

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