Taxes

How much to set aside for taxes on 1099 income: a reseller’s guide

Published October 30, 2026 13 min read

Your tax set-aside should be based on reseller profit, not the gross amount on Form 1099-K. These points offer a practical way to estimate, save, and pay what you may owe.

• Work from sales after refunds, cost of items sold, fees, postage, and other business expenses.
• Inventory you have bought but not yet sold generally is not a current cost-of-goods-sold deduction.
• Budget for both self-employment tax and federal income tax; your actual amount depends on your full tax situation.
• For tax year 2026, 25% to 35% of profit is a federal starting range, not a guaranteed tax rate.
• Keep records, update your estimate through the year, and check whether you need to make estimated payments.

Start with profit, not the amount on your 1099

For tax year 2026, estimate your tax from your reseller profit, not the gross total on Form 1099-K. That form can be useful for checking payment activity, but it does not show what remains after the costs of selling. Your own records help bridge the difference. The reseller tax basics guide explains how profit, reporting, and recordkeeping fit together.

Why Form 1099-K reports gross payments

Form 1099-K reports gross payments settled for you, before expenses and other adjustments reduce the amount you keep. It can include the full amount buyers paid, including shipping, while leaving out no deduction for fees, refunds, or the cost of inventory. So the form is a starting point for reconciliation, not a measure of taxable profit. The 1099-K guide explains how to compare the reported gross with your records.

Subtract refunds, fees, postage, and the cost of items sold

To estimate profit, start with sales and account for refunds, the cost of the items that sold, marketplace fees, postage, and other ordinary business expenses. Buyers’ shipping payments may be included in gross receipts, while labels you pay for are a separate cost. Keep the amounts distinct so you do not accidentally omit an expense or subtract the same one twice. Keep each category separate as you reconcile the year’s activity.

Account for inventory you bought but have not sold

Items still on hand at year end are different from items that sold: the purchase cost of unsold inventory generally is not yet included in cost of goods sold. Record each purchase and track whether the item sold, so you can connect its cost to the correct period. A simple purchase log can include:

• Purchase date
• Source or seller
• Item description
• Amount paid

Use the log alongside your inventory records; the cost of goods sold guide covers how reseller inventory costs are tracked. Keeping this distinction clear helps you avoid treating every inventory purchase as an immediate deduction.

Report taxable profit even if you do not receive a 1099

A missing Form 1099-K does not by itself make business profit non-taxable. If you resell for profit, you still need to report the income under the applicable rules, using your records to determine the amount. A form-reporting threshold is about when a platform must send a form, not whether income is reportable. If you sold personal items or were not operating a business, the reporting can differ; the 1099-K reporting guide for nonbusiness sales describes those distinctions.

Estimate your federal tax on reseller profit

For tax year 2026, estimate federal tax on reseller profit by considering both self-employment tax and income tax. The two parts are calculated differently, and your other income, deductions, and withholding can change the final amount. A rough set-aside is useful for cash planning, but it is not the same as completing a tax return. The IRS self-employed tax center explains the federal obligations that may apply.

Include self-employment tax as well as income tax

If your reseller activity is a business, net profit may be subject to self-employment tax as well as federal income tax. Self-employment tax covers Social Security and Medicare for people who work for themselves; it is separate from income tax. Half of the self-employment tax is generally deductible when figuring adjusted gross income, which affects the income-tax estimate. The IRS self-employment tax information describes the tax and its calculation.

Understand how the 15.3% self-employment tax rate applies

For tax year 2026, the self-employment tax rate is 15.3%, generally applied to 92.35% of net earnings rather than directly to every dollar of profit. The rate consists of Social Security and Medicare portions, and the Social Security portion is subject to a wage-base limit. For tax year 2026, the Social Security wage base is $184,500; see IRS Publication 15 for 2026. The effective calculation can also be affected by wages from a job and other details, so do not treat 15.3% as your complete tax rate.

Use your income tax bracket as a starting point, not a guaranteed rate

Your federal income tax is not necessarily your top bracket multiplied by all your reseller profit. Filing status, other income, deductions, and credits affect the calculation, and tax brackets apply progressively. For a 2026 estimate, use the applicable bracket as a planning input, then account for the deduction for part of your self-employment tax and any other relevant adjustments. The IRS’s 2026 tax inflation adjustments provide the year’s federal figures.

Add state and local taxes to your estimate

A federal estimate does not include state or local tax, which depends on where you live and your circumstances. This guide focuses on federal tax, so check the rules and rates that apply in your area rather than assuming the federal set-aside covers everything. If you enter a state rate into a calculator, treat the result as an estimate and verify it against your state’s guidance. Keeping the federal and state portions visible separately makes it easier to adjust the plan.

Choose a practical amount to set aside

For tax year 2026, a practical federal starting range is 25% to 35% of reseller profit. The lower end may fit some situations, while the higher end gives more room when income or tax details are uncertain; neither percentage guarantees the final bill. Your profit, other household income, deductions, and tax already paid can all change the result. The IRS explains the federal tax components in its self-employed tax guidance.

Use 25% to 35% of profit as a federal starting range for 2026

For tax year 2026, use 25% to 35% of profit as a starting range for federal income tax plus self-employment tax, not as an IRS tax rate. The range is a budgeting shortcut based on the tax components, and your actual amount may fall outside it. Start with profit after business costs, then refine the estimate as your numbers come into focus. A 2026 reseller tax calculator can help work through the figures you enter, but its result remains an estimate.

Adjust the estimate for your other income and deductions

Your reseller profit is only one part of your federal tax picture. Wages, a spouse’s income, deductions, credits, and tax withheld during the year can change how much additional tax you need to pay. If you have a W-2 job, withholding from that job may count toward your overall tax obligation, though it does not change the business profit itself. Revisit your estimate when those other figures change, rather than treating one percentage as fixed.

Set aside more when your profit or tax situation is uncertain

A cautious set-aside can be useful when your sales are seasonal, your expenses are still being organized, or you are not sure how your other income will affect the final calculation. You can begin with a percentage of profit and raise it when the year’s results suggest the first estimate was too low. This is a cash-planning choice, not a promise that a particular amount will cover every tax. If the numbers are complicated, an enrolled agent or CPA can help review your assumptions.

Keep tax savings separate from business spending

Put tax savings somewhere distinct from the account you use for inventory, postage, and routine business costs. That separation makes it less tempting to spend money you may need for a payment later. Consider transferring the set-aside when you review each payout or sales batch, then reconcile the amount against your current estimate. A dedicated account also makes your cash position easier to see without confusing tax savings with available business funds.

Work through a simple tax estimate

For tax year 2026, a simple estimate starts with net profit, adds self-employment tax, and then estimates income tax using your broader tax situation. The arithmetic below is a planning example, not a filing calculation. The IRS self-employment tax guidance explains the basic federal calculation. Use your own figures and verify them before making payments.

Calculate net profit from sales and business costs

Suppose your tax-year 2026 records show $20,000 in gross receipts, $1,000 in refunds, $7,000 in cost of goods sold, and $2,000 in other business expenses. Subtracting those amounts leaves $10,000 of net profit for this simplified example. The figures are hypothetical and do not describe a particular seller. A clear calculation makes it easier to see which number, rather than the gross payment total, is the starting point for estimating tax.

Estimate self-employment tax on that profit

For a simplified tax-year 2026 example, multiply $10,000 of net profit by 92.35%, then apply the 15.3% self-employment tax rate. That produces approximately $1,413 of self-employment tax before considering details such as the Social Security wage base or other earnings. The method and applicable federal rules are described in the IRS self-employment tax guidance. Half of this amount generally reduces income subject to federal income tax, but it does not erase the self-employment tax itself.

Add an estimated income tax amount

For an illustrative tax-year 2026 estimate, assume the applicable marginal income tax bracket is 12%, and use the simplified calculation of $10,000 profit less about $706 for half of the self-employment tax. Applying 12% to roughly $9,294 gives about $1,115 of estimated income tax on that simplified base. This is only an illustration: actual taxable income depends on your full return, and the 12% bracket is not a guaranteed rate on all profit. The IRS’s 2026 tax adjustments are a source for current-year bracket information.

Check how the estimate changes at different profit levels

The same starting range produces different set-aside amounts as profit changes. This tax-year 2026 table applies 25% and 35% as planning percentages only; it does not calculate a tax return or account for individual circumstances.

Compare the ranges with your more detailed estimate, including income tax and self-employment tax, before settling on a transfer amount. The percentages are savings guideposts, not tax rates or guarantees. If your profit grows, rerun the estimate rather than assuming the first amount will continue to fit.

Save consistently as money comes in

For tax year 2026, a steady transfer tied to profit can make tax payments easier to plan for than waiting until filing time. The goal is to keep a current estimate and move an appropriate share of available business money into savings. A payout is not the same as profit, so base the transfer on reconciled sales and costs where possible. Updating the calculation as activity changes helps keep the savings balance aligned with your likely obligation.

Transfer a share of each payout to a tax savings account

Choose a repeatable moment to move money, such as when you review a payout or close out a batch of sales. A separate savings account can make the tax portion less likely to be spent on inventory or daily expenses. If your schedule is irregular, use a regular review cadence that you can keep up with. The transfer should follow your estimate, not replace the work of calculating profit.

Base transfers on profit rather than the 1099-K gross

A Form 1099-K gross amount includes payments before you account for refunds, fees, postage, and sold inventory costs. Setting aside a share of that gross can overstate the money you actually earned, especially when inventory and fulfillment costs are substantial. Reconcile your transaction report and business expenses first, then apply your chosen percentage to profit. The amount reported on an information form and the amount used for your tax estimate serve different purposes.

Update your estimate as sales and expenses change

Revisit your estimate when sales rise or slow down, when you make a significant inventory purchase, or when other income changes. A quarterly review can help you notice that your original set-aside is no longer a good fit. FlowLister writes eBay listings from item photos, with a price taken from sold listings; its listing can become part of a record of what sold, but it does not prepare taxes or keep books. Whatever tools you use, preserve your underlying sales and expense records.

Keep records that support your income and deductions

Save sales reports, payment statements, refund records, purchase information, fee statements, postage costs, and receipts for business expenses. Match each amount to a category and keep notes that explain unusual transactions. These records help you reconcile gross payments to profit and support the figures you use for deductions. The IRS recordkeeping guidance explains why business records matter and what they can document.

Pay estimated taxes on time

For tax year 2026, estimated payments may be needed during the year if withholding and credits will not cover the tax you expect to owe. Paying in installments can help you avoid waiting until you file to address a balance. The requirement depends on your overall tax situation, not just on whether you receive a 1099-K. The quarterly estimated tax guide explains the payment process and reseller-specific planning.

Check whether you need to make quarterly payments

Review your expected total tax, withholding, and credits to determine whether estimated payments may be required. People with self-employment income often need to plan for both income tax and self-employment tax, but the result depends on the full return. The IRS’s estimated tax guidance explains who generally needs to pay and how payments work. Check your estimate during the year rather than waiting until the annual return is due.

Mark the 2026 federal estimated tax due dates

For tax year 2026, the federal estimated tax due dates are April 15, June 15, and September 15, 2026, and January 15, 2027, as shown in the IRS Form 1040-ES instructions. Mark the dates that apply to your payment schedule and leave time to submit each payment. If a due date falls under a special rule for your circumstances, check the current IRS instructions. A calendar reminder can keep a busy selling season from pushing the task aside.

Compare payments with the IRS safe harbor rules

For tax year 2026, compare what you have paid or had withheld with the IRS safe harbor rules before deciding whether your installments are sufficient. The applicable amount can depend on your prior-year tax and current-year income, so do not rely on a general percentage alone. The IRS explains estimated tax and underpayment rules in its estimated tax guidance. If you are unsure how the rules apply, review your figures with a tax professional.

Recalculate after a strong or slow sales period

A strong sales period can raise expected profit, while a slow stretch can lower it; either change may affect the next payment. Update your records, revise your full-year estimate, and compare the result with payments already made. That gives you a chance to adjust upcoming installments rather than letting an old projection stand. If you want help running the figures, try the calculator and review the result as an estimate, not as a substitute for a return.

Conclusion

For tax year 2026, the clearest way to decide how much to set aside for taxes 1099 is to estimate from net reseller profit, account for both self-employment and income tax, and adjust as your real sales and expenses develop. Keep the money separate, track the records behind your estimate, and check payment dates before they arrive. This is general information, not tax advice. Talk to a CPA or enrolled agent about your situation.

Keep reading

• What is Schedule SE? A clear guide to self-employment tax

  Schedule SE is the form that figures Social Security and Medicare taxes on self-employment earnings.

• How to pay quarterly taxes: A step-by-step guide for self-employed sellers

  Estimated payments help you pay federal tax during the year rather than waiting until you file.