Quick Answer
Depop and Poshmark sellers owe taxes on profits when they sell items for more than they paid. If you buy thrift store clothes for $5 and sell for $25, you owe tax on the $20 profit. Casual sellers may owe no tax if selling personal items at a loss, but regular sellers need 1099-K forms and should track all income.
Best Answer
Alex Torres, Former gig worker turned tax educator
Best for sellers who regularly buy inventory to resell and treat this as a business
When do Depop and Poshmark sales become taxable?
If you're regularly buying items specifically to resell them for profit, you're running a business and owe taxes on your net profit. This is true whether you're sourcing from thrift stores, wholesale, or clearance racks.
The key distinction: Are you selling personal items you no longer want, or are you buying items specifically to resell? If it's the latter, you're in business territory.
How the profit calculation works
Your taxable income is revenue minus your cost of goods sold (COGS) and business expenses.
Example calculation:
The 1099-K threshold changes
Starting in 2024, platforms like Depop and Poshmark must send you a 1099-K if you have more than $600 in gross sales (down from the previous $20,000 threshold). However, receiving a 1099-K doesn't automatically make the income taxable — you still only owe tax on profits.
Important: Even if you don't receive a 1099-K, you're still required to report taxable income on your return.
Platform fee comparison
Essential records to keep
Common deductible expenses
What you should do
1. Start tracking now: Use a simple spreadsheet or tool to log every purchase and sale
2. Save all receipts: Physical or digital, including small cash purchases
3. Calculate quarterly: Estimate taxes owed each quarter if making significant profit
4. Consider business structure: If earning over $10,000/year, explore LLC or S-Corp options
[Use our freelance dashboard to track your reseller income and expenses →](https://gigworktax.com/tools/freelance-dashboard)
Key takeaway: Depop and Poshmark sellers owe self-employment tax (15.3%) plus income tax on net profits. A seller making $10,000 profit would owe roughly $2,500-3,000 in taxes depending on their tax bracket.
*Sources: [IRS Publication 334](https://www.irs.gov/pub/irs-pdf/p334.pdf) - Tax Guide for Small Business*
Key Takeaway: Regular resellers owe self-employment tax (15.3%) plus income tax on net profits, which is total sales minus cost of inventory and business expenses.
Platform fees and tax implications for major reselling platforms
| Platform | Seller Fee | 1099-K Threshold | Best For |
|---|---|---|---|
| Depop | 10% + payment fees | $600+ in sales | Trendy/vintage clothes |
| Poshmark | 20% (sales >$15) | $600+ in sales | Designer/brand items |
| Mercari | 10% + payment fees | $600+ in sales | General merchandise |
| Vinted | Buyer pays fees | $600+ in sales | Budget-conscious buyers |
More Perspectives
James Okafor, EA
Best for people selling their own clothes and accessories occasionally
When casual selling isn't taxable
If you're selling your own personal clothing and accessories that you previously wore, and you're selling them for less than what you originally paid, there's typically no taxable income. This is considered a personal loss, not business income.
Example: You paid $80 for a designer dress, wear it a few times, then sell it on Poshmark for $35. The $45 difference is a personal loss, not deductible, but also not taxable income.
When it becomes taxable for casual sellers
Taxable situations arise when:
The gray area: inherited or gifted items
This gets tricky. If you inherit clothes or receive them as gifts, then sell them, the IRS technically considers your "basis" (what you paid) to be $0. So any sale would be taxable income. However, enforcement on small amounts is practically non-existent.
What you should track (just in case)
Even as a casual seller, keep basic records:
This documentation helps if you ever need to prove to the IRS that your sales were personal losses, not business income.
Key takeaway: Casual sellers of personal items usually owe no taxes if selling at a loss, but should keep basic records to document the personal nature of their sales.
Key Takeaway: Casual sellers of personal items at a loss typically owe no taxes, but should document original purchase prices to prove items weren't bought specifically for resale.
Alex Torres, Former gig worker turned tax educator
Best for people with day jobs who resell as additional income
How reselling affects your W-2 taxes
Reselling income gets added to your regular W-2 income, potentially pushing you into a higher tax bracket. If your day job puts you at $45,000 and you make $8,000 profit reselling, your total taxable income becomes $53,000.
More importantly, you'll owe self-employment tax on the reselling profit — 15.3% that covers Social Security and Medicare. Your W-2 job already handles this for your salary, but not for your side hustle.
Tax impact example
Scenario: W-2 salary of $50,000, reselling profit of $6,000
Quarterly payment strategy
Since no taxes are withheld from your reselling income, you may need to make quarterly estimated payments or adjust your W-4 to have more withheld from your day job.
Quick rule: If your reselling profit will be over $1,000, start making quarterly payments or increase W-4 withholding.
Unique deductions for side hustlers
The key is maintaining clear separation between your W-2 work and reselling activities for tax purposes.
Key takeaway: Side hustle resellers owe an additional 15.3% self-employment tax on profits plus regular income tax, requiring quarterly payments or W-4 adjustments to avoid underpayment penalties.
Key Takeaway: W-2 employees with reselling income owe an extra 15.3% self-employment tax on profits and should adjust withholding or make quarterly payments to avoid penalties.
Sources
- IRS Publication 334 — Tax Guide for Small Business
- IRS Publication 535 — Business Expenses
Reviewed by James Okafor, EA on February 28, 2026
This content is for educational purposes only and is not a substitute for professional tax advice. Consult a qualified tax professional for advice specific to your situation.