Furniture Flipping Isn't a Hobby to the IRS: A Reseller's Guide to COGS, Mileage, and the 2026 1099-K Rules

You paid $40 for a scarred dresser at an estate sale, spent a weekend sanding and painting it, and sold it for $300 on Facebook Marketplace. After materials and gas, you cleared maybe $200 for your trouble. Nice side money — and every dollar of it is taxable income the IRS expects to see on your return.

That surprises most flippers. Reselling feels casual: no storefront, no employees, no payroll. But the moment you buy furniture with the intent to resell it at a profit, and you do it regularly, you are running a self-employed business in the IRS's eyes — with deductible expenses, self-employment tax, and, starting this year, a finally stable set of 1099-K reporting rules. Here is how to track it all correctly: what counts as your cost of goods, which miles you can deduct at 2026's split rate, and when the platforms report your sales.

Business or Hobby? The IRS Has a Test for That​

The single most important tax question for a flipper is whether your reselling is a business or a hobby. The income is taxable either way. The difference is the expenses: a business deducts what it spends to earn the money, while a hobby effectively cannot — hobby income goes on your return with no offsetting write-offs for paint, mileage, or booth fees.

How the IRS draws the line​

There is no single rule like "more than ten flips a year makes you a business." Instead, the IRS weighs nine factors from Treasury Regulation 1.183-2(b), including whether you carry on the activity in a businesslike manner, how much time and effort you invest, whether you depend on the income, whether you have changed methods to improve profitability, and your history of profits and losses. No one factor decides it; the whole picture does.

For a flipper, the factors translate into concrete habits. Keeping a per-piece ledger, tracking mileage, maintaining a separate bank account, and pricing with a consistent markup formula all look like a business. Buying pieces on impulse, keeping no records, and selling at whatever price feels right look like a hobby — even if real money changes hands.

The 3-of-5-year profit presumption​

Section 183(d) offers a shortcut: if your activity shows a net profit in at least three of the last five tax years, the law presumes you are in it for profit, and the burden shifts to the IRS to prove otherwise. Most serious flippers clear this bar easily, since materials are cheap relative to sale prices. But if you are in an early stretch of losses — say you furnished a workshop before your first big sales year — your records and businesslike habits are what carry the argument, so keep them sharp from day one.

Track Every Piece Like Inventory​

Flippers who guess at their costs at tax time almost always overpay. The fix is a simple per-piece record: what you paid, what you put into it, what you sold it for, and what the platform took. That record is your cost of goods sold (COGS), and it is the number that turns scary gross sales into an honest — and much smaller — taxable profit.

What goes into COGS​

For each finished piece, add up:

• What you paid for it — the estate-sale, thrift-store, auction, or curb-find price. Keep the receipt; for cash purchases with no receipt, photograph the price tag and log the amount the same day.
• Materials that became part of the piece — paint, stain, topcoat, replacement hardware, new drawer pulls, upholstery fabric, wood filler, sandpaper used on that job. If it ended up on or in the finished piece, it is part of its cost.
• Costs to get it home and ready — delivery or freight charges to collect a heavy piece, dump fees for the parts you stripped off.

What does not belong in COGS: your tools and reusable equipment. The orbital sander, paint sprayer, clamps, and workbench are business assets or supplies, not part of any single dresser's cost. Most small tools fall under the $2,500 de minimis safe harbor, meaning you can expense them in the year you buy them — with a short election statement attached to your return — rather than depreciating them over time.

A per-piece ledger beats a shoebox​

Run one row per piece, something like this:

Two things worth noticing. First, marketplace fees and payment-processing cuts come straight off your profit on Schedule C as selling expenses — a 1099-K reports the gross $300, but you are taxed on what remains after fees and costs. Second, cash sales count exactly the same as platform sales. "Nobody reported it" has never been a tax strategy, and with states sharing more data every year, it gets worse as one annually.

If a piece is still sitting in your garage on December 31, its costs wait: unsold pieces are ending inventory, and you do not deduct their cost until the year they sell. A year-end count of unsold pieces — even a phone photo plus a list — keeps your COGS honest. If you keep your books in plain text, the guides in /docs/ show how to structure inventory and expense accounts so a per-piece ledger stays clean as volume grows.

Mileage: The Deduction Flippers Leave Behind​

Every sourcing trip, supply run, and customer delivery is potentially deductible mileage — and flippers drive more business miles than almost any other home-based seller. In 2026, the rate changed midstream, so getting this right takes one extra step this year.

2026's split rate: 72.5 cents, then 76 cents​

The IRS started 2026 at 72.5 cents per business mile, then raised it to 76 cents per mile effective July 1, 2026, citing higher fuel prices — the first midyear adjustment since 2022. That means your January-through-June miles are worth 72.5 cents each and your July-through-December miles are worth 76 cents. A flipper who drives 6,000 sourcing and delivery miles evenly across the year deducts $4,455 instead of the $4,350 a single rate would have produced. Small difference per mile, real money across a year of estate-sale weekends. Note that about 35 cents of the standard rate represents depreciation, which matters if you later switch to actual expenses.

What counts: trips from your home workshop to pick up inventory, buy supplies, deliver finished pieces, or meet buyers. If you rent a separate shop, the drive from home to the shop is nondeductible commuting, but trips from the shop to suppliers and customers count.

The log is the deduction​

Mileage without a written log is a deduction the IRS can erase on sight. The requirement comes from long-standing substantiation rules: for each trip, record the date, the number of miles, the destination, and the business purpose. A contemporaneous note — jotted in an app at the time, not reconstructed the following April — is what counts. "Estate sale, 14 mi round trip, picked up dresser project" takes ten seconds and is all it needs to say.

Heavy truck and van users should also price out the actual-expense method once: gas, insurance, repairs, and depreciation on a dedicated flip hauler can beat the standard rate. But you must choose in the first year the vehicle goes into service, and going back is restricted, so run both numbers before committing.

The 2026 1099-K Rules, Finally Stable​

For three straight years, online sellers lived under a whiplash rule: the American Rescue Plan had dropped the 1099-K reporting threshold to $600 with no transaction minimum, and the IRS kept delaying it with last-minute notices. The One Big Beautiful Bill Act ended the saga by restoring the original threshold in statute: for 2026, a third-party platform sends you a Form 1099-K only if your gross payments exceed $20,000 AND you have more than 200 transactions — both conditions must be met. Related 1099-NEC and 1099-MISC reporting moved the other direction, rising from $600 to $2,000 for payments made after December 31, 2025.

Three practical consequences for flippers:

1. Most casual flippers will not receive a 1099-K. A few dozen furniture sales a year will not cross 200 transactions. That is a paperwork reprieve, not a tax break — the income was always taxable with or without a form.
2. Reconcile gross to net. If you do get a 1099-K, remember it reports gross payments: the full sale price before marketplace fees, shipping labels, and refunds. Your return starts from that gross number and subtracts fees, COGS, mileage, and supplies to reach taxable profit. Keep platform fee statements so the gap between the 1099-K total and your bank deposits is explainable.
3. Watch your state. A few states set their own lower 1099-K thresholds, so you can still receive one under the federal bar. When a state form arrives, report it the same way — gross on, expenses off.

Sales Tax: The Marketplace Handles Some, Not All​

Here is the good news for online flippers: marketplace facilitator laws now require platforms like eBay, Etsy, Poshmark, Mercari, and Amazon to calculate, collect, and remit sales tax on the sales made through them in every state with a sales tax. If you sell exclusively through those channels, the platform does the sales-tax heavy lifting.

The trap is everything outside those channels. Sales through your own website, a booth at a vintage market, or cash on local pickup are yours to handle: you may need a seller's permit, and you are responsible for collecting the right rate and filing returns. Many flippers run mixed channels — platform sales plus weekend markets — which means the facilitator covers part of your volume and you cover the rest. Check your state's seller's permit rules before your first in-person sale day, not after.

Quarterly Taxes and the $400 Tripwire​

As a self-employed flipper, your profit lands on Schedule C, and two tax bills attach to it: ordinary income tax and self-employment tax of 15.3% on net earnings of $400 or more. That $400 threshold catches nearly everyone who flips more than a piece or two — $400 of net profit for the whole year is all it takes.

Because nothing is withheld from marketplace payouts or cash sales, you generally pay as you go with quarterly estimated payments (Form 1040-ES), due April 15, June 15, September 15, and January 15. A common starting habit: move 25 to 30 percent of each sale's net profit into a separate savings account the day it arrives. You will rarely owe exactly that, but you will never face an April surprise either.

Mistakes That Cost Flippers Real Money​

• Reporting gross payouts as profit. The 1099-K number (or your platform dashboard total) is the starting line, not the finish. Fees, COGS, mileage, and supplies come off before anything is taxed.
• Deducting tools as COGS. The sprayer is equipment, not part of the dresser. Expense small tools under the de minimis safe harbor and keep per-piece costs to what went into the piece.
• Skipping the mileage log. Sourcing and delivery miles are often a flipper's largest deduction after COGS. No log, no deduction.
• Treating cash sales as invisible. Local-pickup cash is taxable income like everything else, and it still belongs in your ledger.
• Waiting for a 1099 to report. Under the restored $20,000-plus-200-transaction threshold, most flippers get no form at all. Your own records are the return.
• Commingling funds. Run flip money through a dedicated account or card. Untangling twelve months of mixed personal and flip spending is how deductions get forgotten.

Keep Your Flip Profits Organized From Day One​

Per-piece COGS, a mileage log, fee statements, and quarterly set-asides are a lot of moving parts for a side hustle — but they are exactly what separates a profitable flipping operation from an expensive hobby with tax problems. Beancount.io provides plain-text accounting that gives you complete transparency and control over your financial data, so every dresser, table, and delivery mile stays traceable from purchase to profit. Get started for free and see why developers and finance professionals are switching to plain-text accounting.