Reseller Tax Deductions: 2026 Write-Offs and 1099-K Guide

Last updated July 2026.

Reselling looks like flipping: buy low at a thrift store, estate sale, or liquidation lot, sell higher on eBay, Poshmark, Mercari, Depop, or Whatnot. The taxes are where flippers lose money they never had to. You are a retailer, so the price you paid for the item you sold is cost of goods sold, not a plain expense, and it only comes off in the year the item actually sells. Platform fees, shipping, mileage to sourcing runs, and packing supplies are all deductible. And the 1099-K your marketplace sends reports the full gross you collected, not your profit, so if you do not track your costs you will look far richer to the IRS than you are.

This guide covers what a self-employed reseller can deduct on a 2026 Schedule C, how cost of goods sold works for used inventory, what to do with a 1099-K, and how to handle personal clothes and furniture you sold on the same account. It is general information, not tax advice for your specific return; confirm the details with your own accountant.

What is the business code for a reseller?

Most online resellers use IRS principal business code 454110, which covers electronic shopping and mail-order houses, the nonstore-retail bucket for selling online. You enter it in box B at the top of Schedule C. If you sell mainly used goods you sourced secondhand, 453310 (used merchandise retailers) also fits. The code you pick barely changes your return; what matters is the structure it signals. You are a retailer, and that one fact decides where your biggest cost goes: the money you paid for the goods you resold is cost of goods sold in Part III of Schedule C, not an expense on line 22.

How do I deduct the cost of the items I buy to resell?

The price you paid for inventory is cost of goods sold, reported in Schedule C Part III (lines 33 to 42), and the total flows to line 4 to reduce your gross sales before any other expense. This is almost always a reseller's largest write-off and the one most people file wrong by dumping it on the supplies line.

Cost of goods sold follows the item, not the calendar. You deduct what you paid for a piece in the year it sells, not the year you bought it. The $8 dress you grabbed at Goodwill in November but did not sell until March is not a deduction this year; it becomes one when it sells. The basic formula is beginning inventory plus purchases during the year minus ending inventory equals cost of goods sold. In practice that means you value what is still unsold on December 31 and carry it forward.

Because used inventory is one-of-a-kind, most resellers use the specific-identification method: you know exactly what you paid for each item, so you match that cost to that sale. Keep a simple spreadsheet with the item, what you paid, the date you bought it, the date it sold, and the sale price. That log is your cost-of-goods-sold record and your audit defense in one.

Do I have to track inventory as a small reseller?

Probably not with a formal inventory system. Under the small-business taxpayer exception in Section 471(c), any business under the Section 448(c) gross-receipts test (average annual gross receipts of $32 million or less for 2026, measured over the prior three years) can skip full inventory accounting. You can use the cash method and treat your goods as non-incidental materials and supplies, which still lands in the same place: you deduct the cost of an item when it sells, not when you buy it. No reselling operation approaches $32 million, so this exception is yours. You still track what you paid and what is unsold, but the IRS does not force a perpetual inventory system on a business your size.

What can a reseller write off besides inventory?

Once cost of goods sold is handled, the ordinary costs of running the shop are deductible in the year you pay them. The common ones for resellers:

• Marketplace and payment fees. Final-value fees, listing fees, Poshmark's cut, Whatnot fees, and PayPal or processor fees are fully deductible on Schedule C line 10, Commissions and fees, or line 27a, Other expenses. On many platforms these are netted out of your payout but still show up in your 1099-K gross, so you deduct them separately.
• Shipping and postage. Postage, labels, and carrier fees you pay to ship sold items go on line 27a. If a buyer pays for shipping and it passes through your account, that reimbursement is income and the postage is the offsetting deduction.
• Packing supplies. Boxes, poly mailers, bubble wrap, tape, tissue, and thermal-printer labels are deductible supplies on line 22.
• Sourcing mileage. The miles you drive to thrift stores, estate sales, garage sales, outlets, and the post office are deductible. See the mileage question below.
• Subscriptions and software. Listing tools, crosslisting apps (List Perfectly, Vendoo), inventory trackers, and accounting software go on line 27a.
• Home office. If you use a room or clearly defined space regularly and exclusively to store inventory, photograph, list, and pack, you may qualify for the home-office deduction. The simplified method is $5 per square foot up to 300 square feet ($1,500 max).
• Photography and equipment. A ring light, backdrop, mannequin, scale, label printer, and a phone or camera used for the business are deductible, expensed outright under the $2,500 de minimis safe harbor or depreciated if larger.
• Storage. A storage unit or off-site space where you hold inventory goes on line 20b, Rent or lease of other business property.

Can I deduct mileage to thrift stores and estate sales?

Yes. Driving to source inventory (thrift stores, estate and garage sales, outlets, auctions) and to drop off shipments is deductible business mileage. For 2026 the standard mileage rate is 72.5 cents per mile, up 2.5 cents from 2025. Keep a mileage log with the date, destination, purpose, and miles, because a believable record is what makes the deduction survive a look. You choose between the standard mileage rate and actual vehicle expenses per vehicle; if you want to keep the option to switch later, use the standard rate the first year you put a vehicle into service. Personal errands mixed into a sourcing trip do not count, so log the business miles only.

What is a 1099-K and what is the threshold for 2026?

A Form 1099-K is the report a marketplace or payment processor sends the IRS showing the gross dollars that flowed to you through the platform. For 2026 the reporting threshold is back to $20,000 in payments and 200 transactions, after the 2025 law (OBBBA) reversed the planned drop to $600. eBay, Poshmark, Mercari, Depop, Whatnot, and PayPal will not send you a 1099-K unless you cross both numbers.

Two things resellers get wrong here. First, no 1099-K does not mean no tax: you must report all your reselling profit whether or not a form arrives. Second, the 1099-K reports gross, not profit. If you sold a jacket for $80 that cost you $15, with $8 shipping and $11 in fees, the 1099-K says $80, but your actual profit was $46. You report the $80 as gross sales and then subtract cost of goods sold and expenses to get to the profit you are actually taxed on. Skip that step and you overpay on money you never kept.

I got a 1099-K for personal stuff I sold at a loss. What do I do?

Cleaning out your closet and selling your own used clothes or furniture at less than you paid is not taxable, but a 1099-K can still land in your mailbox for it. You cannot deduct the loss on personal items, but you can zero out the reported amount so you do not pay tax on it. The IRS method is two offsetting entries on Schedule 1 (Form 1040): report the 1099-K proceeds on Part I, line 8z, Other income, described as "Form 1099-K Personal Item Sold at a Loss," then report the same amount (your cost, capped at the proceeds) on Part II, line 24z, Other adjustments, with the same description. The net effect on your adjusted gross income is $0.

The cleaner move is to keep your personal-sale account separate from your reselling business. When personal clothes-out sales and business flips run through the same platform and land on one 1099-K, untangling them at tax time is a headache. If you sold a personal item at a gain (rare, but it happens with collectibles), that gain is taxable and goes on Form 8949 and Schedule D as a capital gain.

Is reselling a hobby or a business?

It matters, because a hobby cannot deduct expenses at all under current law, while a business deducts everything on this page. The IRS looks at whether you run it to make a profit: do you keep books, source inventory deliberately, track costs, try to improve margins, and depend on the income. A general guidepost is the presumption that an activity is a business if it turns a profit in at least three of the last five years, but that is a safe harbor, not the whole test. If you are sourcing regularly, listing consistently, and trying to grow, you are running a business and file Schedule C. Occasional garage-sale-style selling of your own things is not a business.

Does reselling qualify for the 20% QBI deduction?

Yes, fully. Reselling sells products, so it is not a specified service trade or business, the category (health, law, accounting, consulting, and the like) that loses the qualified business income deduction at higher incomes. You get the full 20% QBI deduction on your net reselling profit with no service-business phaseout.

For 2026 the income thresholds where the wage and property limits even begin to apply are $201,775 of taxable income for single filers and $403,500 for joint filers. Below those, the math is simple: 20% of your net profit comes off before tax. The 2025 law also added a $400 minimum QBI deduction for any active business with at least $1,000 of qualified income, so even a small flip year gets something.

How much self-employment tax will I owe?

As a self-employed reseller you pay self-employment tax, 15.3% (12.4% Social Security plus 2.9% Medicare) on 92.35% of your net profit. For 2026 the Social Security portion applies to the first $184,500 of combined earnings; Medicare has no cap. You deduct one-half of the self-employment tax above the line, which softens the income-tax hit.

Reselling income has no withholding, so you pay quarterly estimated taxes using Form 1040-ES, due roughly April 15, June 15, September 15, and January 15. Setting aside a slice of each payout for these keeps a surprise off your spring return.

Do I need to send 1099s to anyone?

If you pay an unincorporated helper, a virtual assistant who lists for you, or any independent contractor $2,000 or more during 2026 for business services, you issue them a Form 1099-NEC. That threshold rose from the old $600 under the 2025 law. Payments for goods, and anything you pay a corporation, generally do not need a 1099-NEC.

Are startup and LLC costs deductible?

The fees to form an LLC and the money you spend investigating and setting up the business before your first sale are startup and organizational costs, handled differently from ongoing expenses. Under Section 195 you can deduct up to $5,000 of startup costs in your first year (phased out dollar for dollar once total startup spending tops $50,000) and amortize the rest over 180 months. Once the business is running, a seller's permit renewal or annual LLC fee is an ordinary expense on line 23, Taxes and licenses, not a startup cost.

How do I keep all of this organized?

The deductions are only as good as the records behind them. Sourcing receipts from thrift stores and estate sales, wholesale and liquidation invoices, shipping-label charges, supply orders, and platform fee statements all need to be sorted by category so cost of goods sold, supplies, and fees do not blur together at tax time. Scanning each receipt as it comes in and exporting the lot to a spreadsheet means your cost of goods sold and your line-item expenses are already tallied when your accountant sits down with the return.

A growing resale operation also leans on suppliers and platforms. When you buy pallets or wholesale lots from a liquidator, tracking what you ordered against what actually showed up with purchase order management software keeps a short-shipped lot from quietly inflating your cost of goods sold. Sourcing new wholesale or liquidation suppliers goes faster when you can run outreach through a cold email outreach platform instead of chasing one vendor at a time. And when the year closes, reconciling every eBay, PayPal, and platform payout against your books in a bank statement to QuickBooks converter turns a pile of deposit records into clean QuickBooks entries.

For more on keeping the paperwork audit-ready, see our guides on whether the IRS accepts digital receipts, how long to keep business receipts, and how to categorize business expenses for taxes. When it is time to total the year, the receipt to Excel converter and receipt scanner for taxes turn a season of sourcing receipts and shipping slips into a clean spreadsheet your accountant can file from.