What Happens if I Sell Clothes at a Loss on Depop? (Do I Owe Taxes?)
I just spent twenty minutes staring at my ceiling trying to figure out if I owe the IRS money for selling a pair of Madewell jeans I bought in 2019 and wore twice. If you have been wondering, "do you have to pay taxes on depop?" or "do i have to pay taxes if i sell clothes online?", you are not alone. The sheer panic of getting an email with the subject line "Your depop tax form" is enough to make you want to donate your entire closet and move into the woods.
Take a deep breath. Selling on depop for less than you paid for your personal clothes does not create taxable income.
You owe zero taxes on that sale. The IRS does not view your closet clear-out as a profitable business venture. But how they view your sales—and how you report them if you receive a tax form—requires a very specific approach whether you're navigating depop taxes, poshmark taxes, or mercari taxes.
Here is exactly how selling at a loss works for sellers dealing with reseller taxes.
The IRS does not care about your old clothes.
The government categorizes your old shoes, bags, and jackets as "personal use property."
If you bought a vintage leather jacket for $150 three years ago and just sold it on Depop for $60, you didn't make a profit. You took a $90 loss. Because no new income was generated, there is no depop tax bill, nor do you owe sales tax on used goods for simply selling from your own closet at a loss. People often wonder "does depop charge tax?" or "how much does depop tax?"—while platforms handle marketplace sales tax for buyers, your individual income tax is a separate matter entirely.
But there is a catch. The IRS calls this a nondeductible loss.
Because the jacket was a personal item, you cannot use that $90 loss to lower your other taxable income. Personal losses are essentially a tax non-event. They don't add to your taxes for resellers, but they don't give you a tax break either. Whether you are dealing with depop and taxes or poshmark and taxes, the rule applies universally.
Why Depop sent you a terrifying tax form.
A Form 1099-K is just a report of gross payment transactions. It is not a bill. A common question is, "does depop send you a 1099?" The answer is yes, if you cross the reporting threshold. You might wonder if you'll get a depop w2, a poshmark w2, or if do you get a w2 from poshmark, but since you are an independent seller and not an employee, you get a 1099-K instead (e.g., a depop 1099, poshmark 1099 form, or mercari 1099).
My partner recently tripped over a stack of pink polymailers while asking if my "little hobby" was going to trigger a federal audit. I had to explain the current threshold rules for how to file taxes as a reseller.
In 2025, the federal 1099-K reporting threshold returned to $20,000 and 200 transactions. This saved a lot of casual sellers from a mountain of federal paperwork. But the confusion of past years remains. Sellers often ask about older rules, like do i have to pay taxes on reselling items 2022, or search for guidelines on poshmark taxes 2022, depop taxes 2023, do i have to pay taxes on reselling items 2023, and how much can you sell online before paying tax 2023. Even recently, confusion over poshmark taxes 2024 and the postponed poshmark 1099 limit 2024 caused chaos.
So why might you still get a form today, and does depop report to irs? Yes, because of:
- Strict state laws. States like Massachusetts, Vermont, and Maryland have their own local thresholds set as low as $600 (similar to the highly debated poshmark $600 reporting rule).
- Platform policy. Depop, or payment processors you linked through depop stripe, sometimes issue 1099-Ks voluntarily to users who cross lower thresholds just to be safe. (The same applies if you wonder "does poshmark report to irs" or "does offerup report to irs").
If you get a 1099-K for cleaning out your closet, the IRS gets a copy too. If you ignore it, their automated systems will assume the entire amount is taxable business income. You have to tell them it isn't.
How to tell the government you didn't actually make money.
If you sold personal items at a loss but did not receive a 1099-K, you generally do not need to report those specific sales on your tax return. (Answering the age-old question: "do you have to report depop on taxes if I made no profit?").
If you did receive a 1099-K for personal items sold at a loss, you have to report it so the IRS knows why you aren't paying taxes on that money. You are allowed to offset the 1099-K gross amount to zero so it doesn't inflate your Adjusted Gross Income.
Here is the standard method using Form 1040, Schedule 1:
- On Part I Line 8z (Other Income), list the proceeds with the description "Form 1099-K Personal Item Sold at a Loss."
- On Part II Line 24z (Other Adjustments), list the exact same description and amount.
Never enter an offset amount higher than your proceeds. The goal is just to net the transaction to zero. This same process is used if you are figuring out how to report poshmark income on taxes or evaluating a mercari gross sales report for a loss.
Alternatively, some tax software will route this through Form 8949 and Schedule D using code "L" to indicate a nondeductible loss. Both methods just tell the IRS you are recovering a fraction of what you originally spent.
Keep your receipts. Or at least try to.
If the IRS ever questions your 1099-K offset, the burden of proof is on you to show the items sold for less than their original purchase price. This is vital when claiming poshmark tax deductions or offsets.
Keep your original email receipts in a dedicated folder. If you no longer have the receipt for a sweater you bought five years ago, document its fair market value or standard retail price at the time of purchase.
If you are expanding beyond cleaning out your closet and actively looking into how to start a depop shop or how to start selling clothes on depop, staying highly organized becomes just as important as tracking your costs. I have a death pile of unlisted thrift hauls currently functioning as a load-bearing wall in my apartment. Trying to list all of that manually and remember what sold where would absolutely end me. A cross-listing and inventory tool like Voolist helps you clear that backlog quickly by bulk-listing across platforms and automatically syncing your inventory so items delist the second they sell. Instead of scrambling at tax time to figure out which platform a receipt belongs to, Voolist’s dashboard gives you a clean, unified record of all your sales, making it infinitely easier to calculate your final numbers. Those researching how to be successful on depop or how to sell things on depop fast know that efficiency is key.
When the IRS actually wants a cut.
Your sales only cross the line into taxable territory in two scenarios. This answers those pressing questions: "do you pay taxes on poshmark?", "do you pay tax on poshmark?", "do you pay taxes on poshmark sales?", "do i have to pay taxes on poshmark sales?", and "do you have to pay taxes on selling used items?". Whether we are talking about taxes poshmark, poshmark income tax, taxes on poshmark, poshmark sales tax, depop sales tax, poshmark tax reporting, or offer up tax, the core rules are the same. (Also, "do you have to claim poshmark on taxes?" Yes, if you meet the criteria below).
Flipping for profit. If you go to a thrift store, buy a vintage band tee for $5, and sell it on Depop for $50, that $45 profit is taxable self-employment income. You are operating as a business. This is the reality of do i have to pay taxes on reselling items.
Appreciating personal assets. If you bought a limited-edition streetwear drop for $100, kept it in your closet, and later sold it for $300, that $200 profit is taxable as a capital gain. At that point, you'll need to know exactly how much can you sell on mercari before paying taxes (hint: any profit is taxable).
The reality check.
Don't let tax anxiety stop you from emptying your closet. People consistently worry: "do you have to pay taxes on poshmark?", stress about a poshmark tax form or poshmark 1099k, or wonder "do i have to report poshmark on my taxes?"
As long as you are selling personal items for less than you paid, the IRS isn't going to take a cut. Read our Ultimate Reseller 1099-K Tax Guide to understand exactly how the government views different types of online reselling. Then use our free Depop Fee Calculator to see exactly how much you'll take home after Depop takes its cut.
Calculate your margins, print that label, and drop it at the post office before you accidentally decide to keep the vintage sweater for yourself.