Do I Have to Pay Taxes on Income from Facebook Marketplace?

Selling items on Facebook Marketplace has become a simple way to declutter your home or earn extra income. Many people use it casually, never considering the tax implications. As the popularity of online marketplaces continues to grow, more and more sellers are wondering whether the IRS requires them to report this income. The answer depends on what you sell, how much profit you earn, and whether your activity looks like a business.

This guide breaks down how taxes work for Facebook Marketplace sellers so you can stay compliant without overpaying.

Key Highlights

• Money earned on Facebook Marketplace is considered taxable income when you sell items for a profit.

• Selling personal items at a loss is usually not taxable, and the loss cannot be deducted.

• Frequent reselling or flipping can be treated as business income, which may require reporting on Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship).

• IRS Form 1099-K rules do not determine whether income is taxable. You must report taxable profits even if you never receive a form.

• Good recordkeeping helps you document cost basis, profits, and deductible business expenses.

• Marketplace sales tax differs from income tax, and casual sellers generally do not need to handle it themselves.

How the IRS Views Facebook Marketplace Income

Do you pay taxes on Facebook Marketplace income? From the IRS perspective, money earned from selling goods or services on Facebook Marketplace counts as income that may be taxable. This applies whether you sell items online or through a traditional storefront.

Is Facebook Marketplace income taxable? Even if you do not receive a tax form, such as Form 1099-K, you are still required to report taxable income.

Facebook Marketplace sellers generally fall into two groups:

• Casual personal sellers. You list old personal belongings and are not selling with the intention of turning a profit.

• Business style sellers. You purchase or source items specifically to resell or flip them for profit.

How you are taxed depends on which category best matches your activity.

When Selling on Facebook Marketplace Is Taxable

Some Marketplace sales trigger a tax obligation, and some do not. Selling items online, tax rules depend on whether you made a profit.

Selling personal items at a loss or break-even

If you sell a used personal item for less than or equal to what you originally paid, there is generally no taxable income. If you sell for a loss, no tax is due.

You cannot deduct the loss on your tax return because personal items are not deductible.

Selling personal items at a profit

If you sell something for more than you paid for it, you will pay Facebook Marketplace taxes on the profit. Profits from personal items may need to be reported on:

• IRS Form 8949, Sales and other Dispositions of Capital Assets

• Schedule D (Form 1040), Capital Gains and Losses

Frequent or business-style reselling

If the IRS views your activity as a business, your income is treated as business income rather than a capital gain. Indicators include:

• Sourcing items to flip

• Pricing to generate profit

• Posting frequent listings 

Detailing income and deductions on Schedule C or on a business return is part of online marketplace sales tax reporting. You may also owe self-employment tax depending on your total net income.

If your activity looks like a business, structured tax support can help. Learn more about affordable, tax-deductible small business tax filing with 1 800Accountant.

The Role of Form 1099-K and Reporting Thresholds

Form 1099-K is issued by third-party payment processors and marketplace platforms. It reports payment transactions that meet or exceed certain thresholds.

Beginning in 2025, Facebook must issue a 1099-K Facebook Marketplace only if:

• You receive more than $20,000 in payments

• You have more than 200 transactions

This means many casual sellers will not receive a form. However, the presence or absence of a 1099-K does not change the rule. If you earn taxable income, you must report it.

How to Report Facebook Marketplace Income

If you sold a few personal items at a profit

Personal items sold at a gain are generally reported as capital gains. Use the following forms to report your income to the IRS:

• Form 8949

• Schedule D

If you ran a side business or reselling operation

Business income is reported on Schedule C. Consider deducting business-related expenses such as:

• Shipping

• Marketplace fees

• Materials

• Inventory

Maintaining good records helps determine profit or loss correctly. If your Facebook Marketplace selling blends with other self-employed activities, it may help to review our helpful guide on preparing small business income taxes.

Tips for recordkeeping

Accurate records help determine whether a sale is taxable and support your filing.

Keep copies of:

• Purchase receipts

• Listings and sale confirmations

• Messages from buyers

• Payment screenshots

• Any fees or expenses

Distinguishing between personal sales and reselling business activities in your records impacts whether you treat it as a capital gain or business income.

Common Misconceptions and Pitfalls

Myth: If I don’t get a 1099-K, I don’t need to report income.

This is false. Taxable income must be reported whether or not you receive a form.

Problem: I cannot prove what I paid for the item.

If you lack cost basis documentation, the IRS may assume more income than you actually earned. This can increase audit risk.

Myth: Occasional profits are not taxable.

This is a false myth. Even one-time gains must be reported.

When State–Level Sales Tax Gets Involved and When It Does Not

Sales tax and income tax serve different purposes. Buyers pay sales tax on online sales. Marketplace platforms often collect sales tax and remit sales tax for their online sellers. Most casual Facebook Marketplace sellers do not need to file sales tax returns.

Sales tax becomes more relevant if you:

• Run a multi-channel retail business

• Manage inventory

• Have nexus in certain states

Even then, Facebook may handle tax on Marketplace transactions.

What This Means for Side Hustlers, Freelancers, and Small Business Owners

Side hustlers who sell goods for occasional income may not owe tax if they sell at a loss. If you flip items or intentionally resell for profit, your income likely becomes business income. In that case, make sure you:

• Track costs carefully

• Deduct eligible expenses

• Report income accurately

Freelancers and small business owners selling regularly on Facebook Marketplace benefit from organized bookkeeping and proactive tax support. Services like small business tax filing with 1-800Accountant, America's leading virtual accounting firm, can help ensure accurate reporting while identifying tax savings opportunities throughout the tax year.

Quick Checklist: Do I Owe Taxes on My Facebook Marketplace Sales?

Refer to this quick checklist to help determine whether you have sales tax obligations as a result of your Facebook Marketplace activities. 

• Did I make a profit?

• Was this a personal sale or part of regular reselling?

• Do I have records of my original purchase price?

• Did I receive or might I receive a Form 1099-K?

• If selling regularly, am I tracking business expenses?

Summary Table

If your Facebook Marketplace earnings are growing or you simply want clarity on what to report, you do not need to navigate the rules on your own. A dedicated accountant can help you understand your tax obligations, track deductions, and file confidently.

Schedule a free 30-minute consultation with 1 800Accountant to get started evaluating your Marketplace income.