Hi! Happy to assist!
This is a great question, as many of us will be facing this issue when filing 2022 tax return.
TurboTax has an excellent link with detailed information on this:
A Tax Filing Factsheet for eBay Sellers
You will receive a 1099-K form from e-bay for any amount greater than $600.
Hobby sales must be reported
If you and the IRS classify your eBay sales as a hobby, you'll have to report the income on Form 1040. For tax years prior to 2018, you report your expenses as an itemize deduction on Schedule A. Beginning in 2018, you are no longer eligible to take a deduction for hobby expenses.
Since you cannot use hobby expenses to reduce your hobby income, you won't be able to use a loss from hobby sales to reduce other income. This can be important if you make money in other activities.
However, if your eBay activities are considered a business, you can use your loss as a deduction to reduce your other business income, say from landscaping. For example, let’s say that you have:
- A net loss of $5,000 from your eBay sales operation.
- A taxable income of $15,000 from a landscaping business.
- $15,000 (income) - $5,000 (loss) = $10,000 (business income).
Distinguishing between a hobby and a business is not an exact science. The IRS looks to many factors including:
- Frequency of your eBay sales
- How much you earn
- How much time you spend working on the hobby/business
For tax years beginning with 2022, if you have transactions totaling $600 or more then you should receive a 1099-K form reporting this income to the IRS. For tax years prior to 2022, the threshold is more than $20,000 in gross sales and have 200 or more transactions on eBay.
