1. What Are the Etsy 1099-K Tax Changes in 2025?
In 2025, the IRS officially dropped the 1099-K reporting threshold to $2,500, down from the previous $20,000 threshold. This rule impacts Etsy, eBay, PayPal, Venmo, and other third-party platforms.
If you make more than $2,500 in gross sales on Etsy in 2025 OR exceed 200 transactions, Etsy will issue you a 1099-K by January 31, 2026.
But here’s the catch:
Even if you don’t get a 1099-K, you still need to report the income if it was profit-seeking.
“The IRS taxes income, not forms.”
2. What Triggers a 1099-K from Etsy in 2025?
| Condition | Triggered? |
|---|---|
| Gross income ≥ $2,500 | ✅ Yes |
| 200+ transactions | ✅ Yes |
| Less than $2,500 but state threshold is $600 | ✅ Yes (in select states) |
| Hobby seller with $400 profit | 🚫 No 1099-K, but you must file |
Form Delivery: Etsy sends 1099-Ks digitally and/or by mail by Jan 31, 2026.
You can access it via: Settings → Legal & Tax Info → Tax Documents on Etsy.
3. Is Income Under $2,500 on Etsy Taxable in 2025?
Yes, absolutely.
Even if you don’t receive a 1099-K, you must report any profit earned on Etsy.
The IRS uses intent to profit as the trigger for tax liability.
So, even hobbyist sellers who:
- Earned $1,000
- Didn’t hit 200 transactions
- Didn’t receive a 1099-K
…are still required to file income under Schedule C.
Real Example:
- You made $1,900 on Etsy selling jewelry
- You spent $800 on supplies and fees
- Net profit: $1,100
- You must file Schedule C and Schedule SE
4. 1099-K Thresholds by State in 2025
| State | 1099-K Threshold |
| Federal | $2,500 |
| Massachusetts | $600 |
| Vermont | $600 |
| Virginia | $600 |
| Maryland | $600 |
| All Others | $2,500 |
Source: IRS.gov + State Tax Departments
5. What If I Don’t Get a 1099-K from Etsy?
If you don’t receive a 1099-K but had any profit, you must:
- Log into your Etsy account
- Download Gross Sales Report
- Subtract deductible expenses
- Report income on Schedule C and Form 1040
Tip: Self-employment tax kicks in at $400 net profit or more.
Tools That Help:
- QuickBooks Self-Employed: Track mileage, expenses, income
- Keeper Tax: Auto-categorizes Etsy expenses
- TaxAct or TurboTax Self-Employed
6. How to Report Etsy Income to the IRS
Required IRS Forms
| Form | Purpose |
| Schedule C | Report business income & expenses |
| Schedule SE | Self-employment tax calculation |
| Form 1040 | Personal income tax return |
Deductible Etsy Expenses
- Supplies and raw materials
- Shipping costs
- Etsy transaction and listing fees
- Advertising (Etsy ads, Instagram promos)
- Office/studio space (if eligible)
- Equipment depreciation (e.g., printer, camera)
Pro Tip:
Use a separate business bank account for Etsy income to simplify reporting.
You must read: 1099‑K Reporting Changes for Etsy Sellers in 2025: What You Must Know
7. Real FAQs from Etsy Sellers (2025 Edition)
Q: I only made $900 this year on Etsy. Do I need to report it?
A: Yes, if it was profit-driven.
Q: Etsy sent me $2,600. Will I get a 1099-K?
A: Yes, by January 31, 2026.
Q: What if I reinvested all earnings back into materials?
A: You can deduct those costs but must still file a return.
Q: I live in Massachusetts and made $700. 1099-K?
A: Yes. MA has a $600 threshold.
Q: Will the IRS audit me for small Etsy sales?
A: Unlikely, but underreporting = risk + penalties.
8. Smart Tax Tools & Resources for Etsy Sellers
Best Apps for Tax Filing
- Keeper Tax (freelancers + Etsy)
- TurboTax Self-Employed
- TaxSlayer (budget-friendly)
- QuickBooks Self-Employed
Free Resources
9. Verified Sources
- IRS: Form 1099‑K FAQs
- https://www.irs.gov/newsroom/form-1099-k-faqs
- IRS: What to Do with Form 1099‑K
- https://www.irs.gov/businesses/what-to-do-with-form-1099-k
- IRS Instructions for Form 1099‑K (2025)
- https://www.irs.gov/instructions/i1099k
- Etsy: Legal & Tax Information Center
- https://www.etsy.com/legal/tax
- IRS Small Business & Self‑Employed Tax Center
- https://www.irs.gov/businesses/small-businesses-self-employed
- TurboTax Self‑Employed Seller Guide
- https://turbotax.intuit.com/self-employment-taxes/
Etsy 1099-K tax rules in 2025 are stricter, clearer, and impact nearly every seller. Stay ahead by tracking sales, knowing your state’s threshold, and reporting accurately. Ignoring the rules could cost you more than taxes — it could lead to audits and penalties.
Need help managing it all? Bookmark this guide and share it with fellow Etsy sellers. Stay smart, stay compliant.
