Whatnot Taxes & the 1099-K: A Card Breaker's Guide (2026)

If you sell on Whatnot, taxes eventually come up, usually the first time a 1099-K lands in your inbox or a buddy mentions one. This guide explains how Whatnot taxes and the 1099-K actually work for breakers in 2026: the current threshold, the single biggest misconception, and what you can deduct so you are taxed on profit instead of gross sales.

Disclaimer: We build bookkeeping software for breakers, not tax advice. We are not CPAs or tax professionals, and nothing here is tax, legal, or accounting advice. Tax rules change and depend on your situation, so confirm anything below with a qualified tax professional before you file.

Do card breakers owe taxes on Whatnot?

Short answer: yes, if you make a profit. Money you earn breaking on Whatnot is income, and income is taxable. That is true whether breaking is a full-time business or a weekend hobby, and whether or not any platform sends you a form.

What changes is how you report it. If you break as a business, which most regular sellers are, you report sales and expenses and pay tax on the net profit, plus self-employment tax. If it is a genuine hobby, the income is still taxable but the rules on deducting expenses are far less favorable. Either way, the obligation starts with earning the income, not with receiving a form.

The Whatnot 1099-K, explained

A Form 1099-K is an information return that a payment processor sends to you and the IRS, summarizing the gross payments it processed for you during the year. On Whatnot, payouts run through Stripe, so Whatnot issues your 1099-K via Stripe, generally by January 31 for the prior tax year. Eligible U.S. sellers who cashed out through Stripe and met the threshold get one.

For the 2025 tax year, filed in 2026, the federal threshold is more than $20,000 in gross payments and more than 200 transactions. Both conditions have to be met. This is a notable reversal: the American Rescue Plan Act of 2021 had set a $600 threshold, but the One Big Beautiful Bill Act of 2025 repealed it and restored the long-standing $20,000-and-200 rule.

Two caveats matter for breakers. First, the figure on a 1099-K is gross: it is total payments processed before fees, refunds, or your costs, so it will look much bigger than your actual profit. Second, several states set lower thresholds than the federal one. New Jersey, for example, requires a 1099-K at $1,000 with no transaction minimum, and states like Massachusetts, Vermont, Maryland, and Virginia use $600. You can receive a form from a state rule even when you are nowhere near the federal limit.

Getting a 1099-K is not the same as owing tax

This is the misconception that trips up the most breakers, so it is worth stating plainly: the threshold decides whether a form is issued, not whether you owe tax. If you cleared $8,000 in profit but did not hit $20,000 and 200 transactions, you will likely not get a 1099-K, and you still owe tax on that $8,000. The form is a report, not the tax bill.

The flip side is just as important. Because a 1099-K reports gross payments, the number on it is not what you are taxed on. You are taxed on profit, which is your sales minus your costs. A breaker who shows $30,000 on a 1099-K but spent $18,000 on cases, paid ~$3,000 in fees, and ~$1,500 in shipping did not make $30,000; they made closer to $7,500. Reporting the gross figure as income, or ignoring the form because it looks scary, are both mistakes. The fix is the same in either direction: know your real numbers.

Hobby vs business: why it matters

The IRS draws a line between a hobby and a business, and which side you land on changes your tax outcome significantly. A business is an activity you carry on to make a profit, with some regularity and effort. Most people running breaks on a schedule, buying cases to resell, and tracking their results are operating a business.

That distinction matters because a business generally reports on Schedule C and deducts its ordinary expenses against income, so you are taxed only on net profit. Hobby income, by contrast, is taxable, but under current rules hobby expenses are effectively not deductible, which can mean paying tax on a much larger number. If breaking is more than occasional for you, treating it as the business it probably is, with clean records to back that up, is usually the difference that matters most at tax time.

What card breakers can deduct

When you break as a business, you are taxed on profit, and the costs of producing that profit generally reduce it. The usual deductions for a breaker include:

• Cost of goods sold: what you paid for the boxes and cases you opened. This is almost always the largest deduction.
• Platform fees: Whatnot's commission and payment processing, which come straight off every sale. See the Card Breaking Fees guide for how those fees actually add up.
• Shipping to your buyers, plus packaging and supplies.
• Other ordinary, necessary costs of running the operation.

The practical takeaway is that the gross number on a 1099-K is the starting line, not the finish. Every legitimate cost you can document pulls your taxable profit down toward the real number. Our fee calculators show the fee and product side of that math for a single break; tax time is just the same math summed across the year.

Keeping records the IRS will accept

Whether or not you receive a 1099-K, the burden of proving your income and expenses is on you, and that comes down to records. At a minimum you want, for every break: what you sold and for how much, what the case cost, the platform fees taken, and what you paid to ship. Save payout reports, purchase receipts, and shipping records.

The breakers who dread tax season are usually the ones reconstructing a year from memory and a messy bank statement. The ones who do not are the ones who tracked each break as it happened. That is the entire reason BreakDesk exists: to turn every break into a clean, categorized record so that when a 1099-K shows up, you already know your real profit and your deductions are sitting there ready.

One more time, because it is taxes: this guide is general information, not advice. We are not tax professionals. Rules change and your situation is specific, so run the details by a qualified CPA or tax preparer.