The 1099-K Threshold for 2026: What Replaced the $600 Rule

The threshold now, and what happened to the $600 rule

The federal reporting threshold for Form 1099-K is more than $20,000 in gross payments for goods and services and more than 200 transactions in the same calendar year. Both conditions have to be crossed. The $600 threshold that was announced in 2021, delayed year after year, and reported everywhere as settled law was repealed before it ever fully took effect.

The IRS confirmed the reversal in a news release issued October 23, 2025, IR-2025-107, which says the One, Big, Beautiful Bill Act "retroactively reinstated the reporting threshold in effect prior to the passage of the American Rescue Plan Act of 2021." Retroactively is the load-bearing word. This is not a rule that switches on in 2026. It applies as though the $600 threshold had never been enacted, so it governs 2025 payments as well as 2026 ones.

The Instructions for Form 1099-K state it as a conjunction. A third party settlement organization, which is what the IRS calls a payment app or online marketplace, reports only if "the gross amount of total reportable payment transactions exceeds $20,000, and the total number of such transactions exceeds 200." Exceeds, not reaches. Someone with $19,000 spread across 400 sales crosses neither line. Someone with $80,000 across 90 sales crosses only one.

Does no 1099-K mean no tax?

No. This is the sentence the relief around the repeal has buried, and it is the reason this page exists.

A reporting threshold is not a taxability threshold. They are separate rules that happen to share a form. The IRS says so directly in its Form 1099-K FAQs: all income is taxable unless the tax law says it is not, even if you do not get a Form 1099-K. The repeal changed who receives a piece of paper. It did not change what is income.

A hypothetical: you resell sneakers as a side activity and take in $5,000 across 60 sales in 2026, on inventory that cost you $3,000. You are below both federal lines, so no app sends you a form and nothing is filed with the IRS on your behalf. You still have $2,000 of profit, it still belongs on your return, and if the activity is a business rather than a hobby, net earnings of $400 or more also trigger self-employment tax. The self-employment tax calculator shows what that second layer costs on top of income tax, because it is the part side sellers consistently forget.

The practical effect of the repeal is less third-party visibility into small sellers. That is a change in enforcement odds, not in the law.

Which payments count as goods and services?

Only payments for goods and services are reportable. Money moving between friends and family is not. The IRS is explicit that money received from friends and family as a gift or as repayment of a personal expense should not appear on a 1099-K at all. Splitting a restaurant bill, sending your half of the rent, chipping in on a group gift, paying back a friend who covered tickets: none of that is reportable income, and none of it should generate a form.

The distinction is made at the moment of payment, by the sender or the platform, not by the IRS later:

• Peer-to-peer apps offer a personal transfer and a separate goods-and-services or purchase option, and the payer chooses. That choice usually carries a seller fee and buyer protection, which is the tell.
• Business or seller profiles inside those same apps are treated as commercial for every payment, with no per-payment choice.
• Marketplaces and gig platforms treat everything they settle as goods and services.

The exposure is mechanical. A customer who pays you by personal transfer is invisible to the reporting system, and that payment is still taxable income to you. A friend who repays you $900 using the goods-and-services option puts a non-income payment into the reporting system.

The fourth column never changes with the third. That is the whole point.

Selling your own used things at a loss

Most people who sell on a marketplace are selling used personal property for less than they paid. A couch bought for $1,200 and sold for $400 is a loss, and a loss on the sale of a personal item is not deductible. You cannot use it to offset a gain on something else, and you cannot use it to reduce other income.

If no form is issued, there is nothing to report, because there is no gain. If a form is issued anyway, whether from crossing the federal lines, a state rule, or platform policy, the gross amount is on file with the IRS and leaving it off the return invites a matching notice. The IRS guidance in what to do if you receive a Form 1099-K describes offsetting entries on Schedule 1 of Form 1040:

1. Part I, line 8z, Other Income, described as "Form 1099-K Personal Item Sold at a Loss," for the proceeds amount from the form.
2. Part II, line 24z, Other Adjustments, with the same description, for your cost up to but not more than the proceeds amount.

The net effect on adjusted gross income is zero. You are not deducting the loss, you are backing out an amount that is not income. The IRS also allows reporting the sale on Form 8949, which carries to Schedule D, using code L in column (f) to mark the nondeductible loss.

Sales at a gain work differently. Tickets bought for $250 and sold for $800 produce a $550 capital gain, reported on Form 8949 and Schedule D. Holding period decides the rate; the 2026 capital gains tax rules cover that split.

Hobby or business, and why the label decides what you can deduct

This is where the money actually is, and the 1099-K threshold has nothing to do with it.

If the activity is a business, you file Schedule C, deduct ordinary and necessary expenses against the revenue, and pay self-employment tax on net earnings of $400 or more. A loss can offset other income. If the activity is a hobby, you report the income on Schedule 1 and you deduct nothing. Hobby expenses are miscellaneous itemized deductions, and those are not currently deductible. A hobby with $4,000 of revenue and $3,800 of costs is taxed on $4,000.

You do not pick the label. IRS guidance on the difference between a hobby and a business weighs whether you run the activity in a businesslike way with complete records, whether you depend on the income, whether your time and effort suggest a profit motive, whether you have the knowledge to run it profitably, whether it has made a profit in some years, and how much personal recreation is involved. No single factor decides it. Record-keeping is the factor a seller controls most directly.

Your state may set a lower threshold anyway

Several states impose their own 1099-K reporting rules on payment apps and marketplaces, and some of those thresholds sit far below the federal one. The IRS acknowledges this in its FAQs: you may receive a Form 1099-K even if your gross payments and transaction count did not exceed the federal threshold, because your state required it.

State figures move and vary, so confirm your own state's rule with its department of revenue rather than assuming the federal number covers you. The shape matters more than the digits: the federal threshold is not the only way a form gets issued, a form arriving does not mean you crossed $20,000, and platforms sometimes issue forms below any threshold as policy. Build the return from your own records, then reconcile whatever forms arrive against them.

What the form does not tell you: gross is not profit

Box 1a of a 1099-K reports gross payments. The IRS states that this amount does not adjust for fees, credits, refunds, shipping, cash equivalents or discounts, and that those items are not income. A seller with $60,000 in Box 1a might have paid $7,000 in platform fees, refunded $3,000, and spent $30,000 on inventory. The taxable number is the profit, and the form has no idea what it is.

That is why basis records matter more than the threshold does. Basis is what you paid for an item, plus certain costs of acquiring it. Without it you cannot prove a sale was at a loss, compute a gain, or deduct cost of goods sold. Receipts, order confirmations, card statements, and a running spreadsheet of purchase date, purchase price, sale date and sale price are enough for most sellers. A separate account makes that reconstruction far easier, which is part of what business bank accounts are for.

What people get wrong about the 1099-K threshold

• Assuming no form means no tax. The most common and the most expensive. Income is taxable whether or not a form is issued, and the repeal did not create a $20,000 tax-free allowance.
• Treating the Box 1a number as profit. It is gross settlement volume before fees, refunds, shipping and cost of goods.
• Running personal and business money through one account. When a form arrives covering a mixed account, you are the only one who can separate the taxable payments from the gifts and reimbursements, and only if your records let you.
• Keeping no purchase records. Without basis, a sale at a loss looks identical to a sale at a gain, and the burden of showing otherwise is yours.
• Ignoring a form because the sales were personal items. A form the IRS has and the return does not is a matching notice. The offsetting Schedule 1 entries exist for exactly this.
• Believing the $600 rule is still coming. It was repealed, not delayed again. The next scheduled change to the wider 1099 system is separate: for payments made in 2026, the reporting threshold for Forms 1099-NEC and 1099-MISC rose from $600 to $2,000, indexed for inflation after 2026. A summary of that and the rest sits in what changed for 2026 taxes.

Where this threshold does not apply at all

The $20,000 and 200-transaction test is narrow. It applies only to third party settlement organizations reporting third party network transactions. Several things fall outside it.

Card payments are the biggest exception. A payment settlement entity acting as a merchant acquirer, meaning the processor that settles credit and debit card transactions for a merchant, must file a 1099-K for every participating payee with no de minimis threshold at all. A small business that takes card payments directly through a card processor can receive a 1099-K for a few hundred dollars.

The test also says nothing about contractor payments, which run on Forms 1099-NEC and 1099-MISC under separate rules; nothing about wages, which run on a W-2; nothing about state income tax; and nothing about sales tax, which is its own obligation. It exempts no one from filing a return, and it does not move the $400 self-employment tax floor. If the real question is what side income costs overall, the income tax calculator handles the federal bracket math once you know your profit.

What to do before you file

• Download the transaction history from every app and marketplace you sold through, whether or not it issued a form.
• Separate goods-and-services payments from gifts and reimbursements, and note which account each ran through.
• Match each sale to a purchase record so you know your basis, and flag the items sold at a gain.
• Decide, honestly and on the IRS factors, whether the activity is a business or a hobby, because it determines whether your expenses count.
• Reconcile any 1099-K you received against your own totals, and ask the issuer for a corrected form if it includes personal payments.
• Set aside an estimate for self-employment tax if net earnings from the activity will reach $400.
• Open a separate account for next year if you have been mixing personal and selling money in one place.

If your year mixes gains, losses and business sales, software that imports 1099-K data and walks the personal-item entries is worth comparing; see tax software options. The underlying work is still the records. The threshold decides who gets mail. Your records decide what you owe.