Are Depop Fees Tax Deductible? A Guide for US Sellers

Are Depop Fees Tax Deductible? A Guide for US Sellers

Selling on Depop can be an exciting venture, turning your unique style and thrifted finds into a profitable business. But as your sales grow, so do the questions about managing your finances, especially when it comes to taxes. Many sellers wonder about the various fees and how they impact their bottom line.

One of the most common questions we hear is: "Are Depop fees tax deductible?"

The short answer is yes. For sellers in the US who operate their Depop shop as a business, Depop fees are a deductible expense. This is a crucial piece of information that can significantly lower your taxable income and help you keep more of the money you earn.

This guide will walk you through everything US-based Depop sellers need to know about their tax obligations, from understanding which expenses you can write off to decoding the 1099-K form. We'll show you how to manage your Depop taxes effectively, so you can focus on what you do best: sourcing and selling great items.

Understanding Your Depop Tax Obligations

Before diving into deductions, it's essential to understand the basics of depop taxes. When you sell items regularly on the platform, the IRS likely views your shop as a small business, not just a casual hobby. This distinction is critical because it changes how you handle your income and expenses.

Depop sellers who run their stores as a bona fide business must pay taxes on their profit.

When Do You Owe Taxes on Depop Sales?

A key number to remember is $400. If you make $400 or more in profit from your Depop store in a year, you should assume you owe taxes. This threshold applies to all self-employment income, regardless of whether you receive a tax form from Depop.

This rule applies to all sellers, regardless of age or dependent status. If your Depop shop is profitable, you should plan on filing your own tax return.

Income Tax vs. Self-Employment Tax

As a Depop seller, you are considered self-employed. This means you are responsible for two primary types of taxes on your business profit.

First is the standard income tax, which is the same tax that employees at traditional W-2 jobs pay. However, unlike a W-2 job, taxes will not be automatically withheld from your Depop earnings. You are responsible for calculating and paying this yourself.

Second is the self-employment tax. This is also called FICA (Federal Insurance Contributions Act) tax, and it funds Social Security and Medicare. While traditional employees split this 15.3% tax with their employer, self-employed individuals are responsible for the full amount.

The good news is that running a business means you have the ability to lower your taxable income by claiming business expenses, which we'll cover next.

A Comprehensive Guide to Depop Business Expenses & Write-Offs

One of the biggest advantages of being a business owner is the ability to deduct your expenses. When people talk about "writing something off," they simply mean subtracting the cost of business expenses from your income to calculate your taxable profit.

You are only taxed on your profit, which is your total Depop earnings minus the costs you incurred to make those sales. Hobbyist sellers are not able to claim these write-offs, making the business classification very important.

Here is a detailed list of common deductible expenses for Depop resellers.

Depop Fees & Other Platform Fees

Let's start with the main question. Yes, Depop fees are deductible. These are considered a direct cost of doing business on the platform. Similarly, if you use PayPal to process payments, PayPal fees are also deductible.

Cost of Goods Sold (COGS)

This is one of your largest and most important deductions. It includes all the costs associated with acquiring your inventory.

• The cost of items you resell: Whether you source from thrift stores, wholesale suppliers, or your own closet, the initial cost of the items is deductible.
• Repair costs: Money spent on repairing items to get them ready for resale can be written off.
• Cleaning costs: The cost of getting clothing laundered or dry-cleaned before selling is also a deductible expense.

Shipping and Packaging Supplies

The costs to package and ship your products are fully deductible. This includes a wide range of materials.

• Padded envelopes and boxes
• Packing tape
• Bubble wrap
• Tissue paper
• Sharpies for labeling

Essentially, any material you use to package your products for shipment can be written off.

Shipping Costs

The cost of a shipping label is a deductible business expense. This applies whether you use a Depop-generated, flat-rate label or purchase postage from another carrier.

It's important to note that shipping costs are only deductible if you, the seller, are the one paying for shipping. If your item is not marked with "free shipping," the buyer is paying for the label, and it is not a write-off for you.

Home Office & Workspace

Your dedicated workspace is a valuable deduction. This can be the area where you store your inventory, the space where you stage and take photos, or your desk where you manage listings.

Phone & Internet Bill

You likely use your phone for many business tasks: editing photos, posting new items, generating shipping labels, and communicating with buyers. A portion of your monthly phone bill can be deducted as a business expense. This is true even if you are on a family plan.

Photography & Marketing Expenses

Creating a strong aesthetic for your shop is part of the business. Money you spend on photography and marketing materials can be written off.

• Ring lights
• Backdrops
• Props for photos
• Fancy photo editing apps

Transportation Expenses

If you use your car for business activities, you can deduct the associated transportation expenses. This includes driving to the post office to drop off packages or driving to locations like Goodwill bins to source new inventory.

How to Easily Track Your Deductions

Keeping track of all these expenses can feel overwhelming, especially when you're busy listing and shipping. This is where having a dedicated system is essential for saving money and staying organized.

Our platform is designed for resellers and includes full-service accounting tools to simplify this process. You can connect your bank accounts to automatically record transactions, fees, and expenses. No more manual data entry in spreadsheets. Our system categorizes your income and expenses, so you can easily file your taxes and generate clear profit and loss reports. You can even upload photos of receipts for seamless record-keeping and audit protection.

As PCT Vintage Finds, one of our users, said, "No more spreadsheets. My bookkeeping is now all automated thanks to Reeva accounting."

Start your free trial of Reeva today and see how our automated accounting can take the stress out of tax time.

Decoding the Depop 1099-K Form

Another major topic for sellers is the Depop 1099 form, officially known as Form 1099-K. This form is used by third-party payment settlement entities, like Depop and PayPal, to report the payment volume processed for their users to the IRS.

Who Receives a 1099-K from Depop?

The rules around the 1099-K have been a source of confusion recently. The American Rescue Plan Act of 2021 was supposed to lower the reporting threshold to $600 for the 2023 tax year. However, the IRS decided to delay this change at the last second.

For now, the federal threshold is back to the original level: you will automatically receive a 1099-K form from Depop if you made over $20,000 in gross sales AND had at least 200 transactions within the calendar year.

This $20,000 threshold is much harder for many Depop sellers to meet. However, it's important to be aware of another threshold. Some sources state that a 1099-K form is provided to a US-based seller if they had $5,000 USD in total gross volume in the previous calendar year. State requirements can also vary and may have lower thresholds, so it's crucial to stay informed.

The IRS requires your SSN, ITIN, or EIN to be on the form for filing. If you operate as an individual or sole proprietorship, your Name and SSN will be reported.

What if I Use PayPal and Depop Payments?

If you use both Depop Payments and PayPal to collect money from buyers, you will likely get two separate 1099-K forms. You'll receive one from Depop and another from PayPal.

The form from PayPal will include all income you received on that platform, which could include payments from other ventures, not just Depop sales.

What if I Don't Receive a 1099-K?

This is a critical point: not receiving a 1099-K does not mean you don't have to pay taxes. The 1099-K is just a reporting form. The actual requirement to file and pay taxes is based on your profit.

Remember the $400 self-employment income threshold. If you earned more than $400 in profit, you should plan to file a tax return, whether you get a 1099-K or not.

You can see your sales history and gross totals by accessing Depop’s Selling Hub to find the information you need.

Potential 1099-K Issues

The system is still relatively new, and glitches can occur. Tax consultant Bill Hampton encourages filers to monitor their transactions on third-party platforms closely. For example, if a friend sends you money through PayPal for personal reasons and accidentally selects “paying for an item or a service,” that amount could erroneously be counted toward your 1099-K income threshold.

Companies are required to send out 1099-K forms by January 31 each year.

How to Report Your Depop Income and Expenses

Once you've gathered your income totals and your list of deductible expenses, you need to report them to the IRS. For self-employed individuals like Depop sellers, this is done using Form Schedule C, "Profit or Loss from Business."

Filling Out Schedule C

Schedule C is filed along with your personal tax return (Form 1040). It has several parts, but two are most important for Depop sellers.

• Part I: Gross Receipts or Sales. This is where you report your total income before any deductions. The 1099-K form details your gross income. If you sell on other platforms like Poshmark, eBay, or Mercari, you will include what you earned from those sources here as well.
• Part II: Expenses. This is where you list all your business deductions. You'll record the totals for categories like supplies, car expenses, office expenses, and fees. The total from this section is subtracted from your gross income to determine your net profit or loss.

Your net profit from Schedule C is the amount you will pay income tax and self-employment tax on.

Quarterly Estimated Taxes

Because taxes aren't automatically withheld from your Depop sales, you may be required to pay them throughout the year. Online sellers who expect to owe more than $1,000 in taxes for the year are required to pay estimated quarterly taxes.

The filing dates for these quarterly payments are typically:

• April 15
• June 15
• September 15
• January 15 of the following year

Paying quarterly helps you avoid a large, unexpected tax bill and potential underpayment penalties when you file your annual return.

Scale Your Resale Business and Simplify Taxes with Reeva

Managing inventory, listings, sales, and finances across multiple platforms is a huge challenge for any reseller looking to grow. Juggling spreadsheets, tracking expenses manually, and worrying about tax compliance can take up valuable time—time that could be spent sourcing more products and increasing sales.

This is precisely why we built Reeva. Our platform is an all-in-one solution designed to help resale businesses simplify selling, automate tasks, and grow with ease.

Full-Service Accounting Built for Resellers

Forget the stress of tax season. Our platform offers full-service accounting tools that integrate directly into your resale workflow. We help you stay on top of your finances year-round, not just in April.

• Automated Tracking: Connect your bank accounts, and our system automatically records your transactions, expenses, and platform fees.
• Easy Categorization: We categorize your income and expenses, so you always know where your money is going and can easily file your taxes.
• Receipt Management: Simply upload a photo of a receipt and attach it to a transaction for seamless record-keeping and complete audit protection.
• Powerful Reporting: Generate clear profit and loss reports with the click of a button to make smarter, data-driven business decisions.

Save Time and Sell More with Automation

Many of our users have dramatically reduced their administrative workload. TUFFNY, a reseller from New York, cut their admin time by at least 30%, allowing them to source more products. How do we make this happen?

• List Everywhere with One Click: Publish your items to multiple marketplaces like Poshmark, eBay, Mercari, and Depop without switching tabs.
• Instantly Delist Sold Items: Our auto-delist feature prevents you from overselling an item across different platforms. AlistairBP from Georgia told us this is the feature they "couldn't live without."
• Automate Poshmark Sharing: Automatically share your products on Poshmark to boost visibility and keep your listings at the top of search results.

Grow Your Business to New Heights

Our tools are built to help you scale. Vintage Vault WV increased their sales by 372% in just three weeks. Nuzzydeals saw a 7x increase in sales. FabFam doubled their listing amount. We provide the infrastructure to handle growth, whether you're a solo entrepreneur or managing a team.

You can manage your entire business seamlessly from your mobile device, desktop, or tablet. No Chrome extension is needed, and you don't have to keep your computer running for our automation to work.

If you're ready to stop juggling multiple programs and start growing your resale business, we invite you to see what our platform can do for you.

Try Reeva free for 7 days and discover a smarter way to run your resale business.

Conclusion: Take Control of Your Depop Taxes

Navigating the world of Depop taxes doesn't have to be intimidating. By understanding your obligations and keeping meticulous records, you can manage your finances with confidence and maximize your hard-earned profits.

To summarize the key points for US sellers:

• Depop fees are tax deductible for sellers who operate their shop as a business.
• You can and should deduct all your business-related expenses, including the cost of your inventory, shipping supplies, workspace, and more.
• You likely owe taxes if you make $400 or more in profit in a year, even if you don't receive a 1099-K form.
• The current federal threshold for receiving a 1099-K is $20,000 in sales AND 200 transactions, though state rules may differ.
• Use Form Schedule C to report your business income and deductions to the IRS.

Running a successful resale business requires more than just a good eye for fashion—it requires smart management. By leveraging the right tools, you can automate the tedious parts of the job, like bookkeeping and inventory management, and free yourself up to focus on growth.

Our platform was built by resellers, for resellers, to solve these exact challenges. From AI-powered listing creation to automated cross-listing and full-service accounting, we provide everything you need to scale your business in one place. Stop letting administrative tasks hold you back.

Start your free trial of Reeva today and transform the way you run your resale business.