If your sales on E-bay are classified as a hobby, the only deductible expense is the cost of the goods that you sold. E-bay fees, shipping, home office deductions, and anything else are not deductible expenses. Enter it into TurboTax this way:
- Open your TurboTax software and continue your return
- Select the Personal tab
- In the Wages & Income section, select I’ll choose what I work on
- Scroll down to Less Common Income. Select Start next to Miscellaneous Income, 1099-A, 1099-C
- Select Start next to Hobby income and expenses
- Answer Yes on Do you have hobby income or expenses?
- On the next screen, enter the Total income reported on your Form 1099-K. Don't enter any expenses.
- Select Done
- To deduct the cost of items sold: while still in Miscellaneous Income, select Start next to Other reportable income
- Answer Yes on Any Other Taxable Income?
- Enter Form 1099-K in the Description field. Enter the total cost of the items sold in the Amount field as a negative number. Note that the amount can’t exceed the income reported on Form 1099-K.
@bosso3 gave several links for determining whether your E-bay activities should be classified as a business or hobby. That is something you will have to determine and be able to provide justification for if the IRS should disagree.
If you determine it is self-employment, you will be subject to self-employment taxes, but all ordinary and necessary expenses would be deductible. Both Form 1099-K and the expenses would be reported in the self-employment section of your return:
- Type Schedule C in the Search box
- Select the Jump to link
- Answer Yes to Did you have any self-employment income or expenses? and answer the questions until you get the What kind of expenses did you have for your business? screen. Select your expenses, then Continue
