If you get paid on Venmo, PayPal, or Cash App, this is the part most people get wrong. Yes, the $600 rule is gone. Most people won’t get a tax form anymore. But no form doesn’t mean no tax.
Get it wrong one way, and you overpay on money that was never income. Get it wrong the other way, and the IRS sends you a letter.
What a 1099-K actually is
A Form 1099-K is a report that payment apps and online marketplaces send to you and to the IRS. It shows the total money that came through your account for goods and services during the year.
Notice the word total. It’s your gross payments, before fees, refunds, or the cost of what you sold. A 1099-K is not a bill and it’s not your profit. It’s just a number the IRS can compare against your tax return.
The threshold rollercoaster
For years the rule bounced around: $20,000 and 200 transactions, then $600, then $5,000 for 2024.
Then in July 2025, the new tax law, often called the One Big Beautiful Bill, put the old rule back. Now a payment app only has to send you a 1099-K if you receive more than $20,000 and more than 200 transactions on that platform in a year.
So the “$600 Venmo rule” is gone. But the form change is not the whole story.
The form changed. The tax didn’t.
The $20,000 threshold only decides whether the app sends a form. It doesn’t decide whether you owe tax.
If you earn money from a side gig, selling things for profit, or freelance work, that income is taxable whether it’s $50 or $50,000, and whether you get a 1099-K or not. Same as cash. Same as a check. The threshold controls the paperwork, not the tax.
So if you made $8,000 last year doing hair from home and got paid through Cash App, you probably won’t get a 1099-K. But you still need to report that income.
Your state may have its own rule
Some states didn’t follow the federal change. A number of them, including California, Massachusetts, Maryland, Virginia, and Vermont, have used thresholds as low as $600 for their own reporting. So depending on where you live, you might still get a form for a much smaller amount. These lists change, so check your state’s current rules.
Money that is not taxable
A lot of the money moving through your apps isn’t income at all.
- Splitting bills and paying people back. Your roommate sends you their share of rent. A friend pays you back for concert tickets. That’s not income.
- Gifts. Your mom sends you $200 for your birthday. Not income to you.
- Selling your own used stuff at a loss. You bought a couch for $800 and sold it for $300. You lost money, so there’s no taxable gain. But if a platform sends you a 1099-K for that sale, you still show it on your return and zero it out. Don’t just ignore the form.
If you sell a personal item for more than you paid, like concert tickets you resold for a profit or a collectible sneaker that went up in value, the profit is a taxable gain. And a loss on one sale can’t cancel out a gain on another personal sale. Each one stands on its own.
The easiest way to avoid confusion is to keep personal and business money separate. Many apps let you mark a payment as personal or for goods and services. Better yet, use a separate account for your side business. Then if a 1099-K shows up, you already know what’s on it.
Is it a business or a hobby?
Once you know your app money is income, the next question is: is it a business or a hobby? It matters more than you’d think.
The IRS looks at whether you’re trying to make a profit. Do you run it like a business, keep records, put in regular time, and try to improve your results? Do you depend on the income? Have you made a profit in some years? A common guideline is a profit in at least three of the last five years.
If it’s a business, you report it on Schedule C. You can deduct real business expenses: supplies, app fees, mileage, part of your phone bill. You pay income tax on the profit, not the total. But you also pay self-employment tax, which is Social Security and Medicare for the self-employed, about 15.3%, once your net earnings reach $400 for the year.
If it’s a hobby, the income still gets taxed. But under current rules, you generally can’t deduct hobby expenses. You also don’t pay self-employment tax.
Say you have $8,000 in sales and $3,000 in supplies and fees. As a business, you’re taxed on $5,000 of profit, plus self-employment tax. As a hobby, all $8,000 counts as income, with no expense deduction.
So calling something a hobby isn’t automatically a tax break. For most real side gigs, treating it as a business, with good records, is the right answer.
What to do now
- Separate your money. Use one app or account for your side gig and another for personal payments.
- Track income as it comes in, not in April. Write down who paid you and what it was for.
- Keep receipts for expenses. Supplies, fees, mileage, equipment.
- If you get a 1099-K, compare it to your records. Remove personal payments and refunds on your return, and keep notes on why.
- Set money aside. If you have a profitable side gig, saving 20 to 30 percent of your profit for taxes keeps April from being a shock.
The bottom line: the $600 Venmo rule is gone, and most people won’t get a 1099-K anymore. But side-gig income was always taxable, and it still is. The form was just how the IRS found out.