Do I have to pay taxes on Etsy and eBay sales in 2025?

Yes, income from selling on Etsy, eBay, and similar platforms is generally taxable. The key distinction is whether you are selling as a hobby or a business, and whether you are selling items at a gain or a loss.

1099-K reporting: Starting with the 2024 tax year, platforms like Etsy and eBay must send you a 1099-K if your gross sales exceed $5,000 (this threshold is being phased down from $20,000 to $600 over several years). Receiving a 1099-K does not automatically mean you owe taxes on the full amount.

Selling personal items at a loss: If you sell used personal items for less than you originally paid (a used couch, old clothes), there is no taxable gain. You may still receive a 1099-K for the gross proceeds, but you can offset this by reporting your cost basis. Report on Schedule D and Form 8949 for capital assets.

Running a business: If you regularly make and sell products (crafts on Etsy, flipping items on eBay), the IRS considers this a business. Report income and expenses on Schedule C. Deductible expenses include materials and supplies, shipping costs, platform fees and commissions, packaging, home office (if eligible), and advertising costs.

Hobby vs. business: The IRS looks at factors including profit motive, time spent, expertise, and whether you depend on the income. If you report losses for 3 or more years out of 5, the IRS may reclassify your business as a hobby, disallowing deductions. Hobby income is reported as other income on Schedule 1 but expenses are no longer deductible (the TCJA eliminated the miscellaneous itemized deduction for hobby expenses).