What is the $600 Rule on eBay?

eBay sellers are familiar with the 1099-K form threshold and how it affects tax reporting. This rule defines when eBay is obligated to report seller earnings to the IRS. It may be a side hustle or a full-fledged business operation, but the reporting thresholds are fundamental for taxation compliance.

Fundamentals of the $600 Rule

Prior to 2024, online platforms like eBay were only obliged to send tax forms to sellers who exceeded $20,000 in sales and conducted more than 200 transactions in a year. Under the latest tax laws, such a threshold has been drastically reduced to $5000 in 2024 and $2500 in 2025. The plan for 2026 is that if an individual receives $600 or more in payments through eBay, the platform is required to issue a Form 1099-K and report all the earnings to the IRS.

Do You Owe Taxes on eBay Sales?

The IRS accepts earnings from eBay sales as taxable. However, whether taxes are owed depends on the nature of the selling activity:

• Casual sellers who sell used personal items at a loss generally do not owe taxes.
• Business sellers who buy inventory to resell for a profit have a reporting obligation. Moreover, they may qualify for eBay seller tax deductions to lower their taxable income.

Reducing The Tax Bill as an eBay Seller

eBay business expenses write-offs, present a legal option such as:

• eBay seller fees (listing fees, final value fees and transaction fees)
• Shipping and packaging costs (postage, labels, boxes and tape)
• Cost of Goods Sold (COGS) (the original purchase price of items resold)
• Home office expenses (if a dedicated space is used for business operations)

What Happens if You Don’t Report eBay Income?

Not reporting taxable eBay sales could simply result in:

• IRS penalty amounts due to underreporting income.
• Audits alongside additional tax liabilities.
• Accrued interest on unpaid taxes.

Since eBay directly reports earnings over a certain threshold to the IRS, tax issues can be triggered easily if income is not reported correctly.

Final Thoughts

The $600 rule has an essential impact in terms of tax reporting requirements for eBay sellers. If you earn over a certain threshold, a 1099-K form should be expected and establish that you record all expenses in order to optimize eBay seller tax deductions. Organized reporting practices, alongside assistance from taxation professionals, can present tax optimization by keeping you fully compliant