Venmo is a convenient platform to send, receive, and request money. But if you use Venmo for certain types of transactions, you may have to pay taxes.
The good news is that personal transactions on the payment platform usually do not generate tax obligations. But when you use Venmo for business purposes or for the sale of goods for profit, you’ll need to prepare for a tax bill.
If you don’t know how taxes work on Venmo, read on. You’ll learn which Venmo transactions the Internal Revenue Service considers taxable and what you need to know when preparing your tax return. We’ll also explain some new IRS rules for Venmo and other payment apps that you should prepare for in 2025 and 2026.
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When you send money to friends and family using Venmo, you typically don’t need to worry about paying taxes or reporting the transactions to the IRS. But if you use Venmo or other peer-to-peer payment platforms, such as PayPal or Cash App, for payments and business purposes, you will need to report income and pay taxes on the money you receive.
Below are some examples of transactions that No having to report to the IRS or pay income taxes on:
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Your friend sends you money via Venmo to cover their share of a meal or an Uber ride.
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Your mom sells you money as a birthday gift.
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Your roommate sends you half of the rent and electric bill via Venmo.
But if you use Venmo to collect payments for your small business or side business, or you’re selling items for a profit, you must report the money you earn to the IRS and pay taxes on it. Below are some examples of Venmo transactions that meet reporting requirements and trigger tax obligations:
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You own a business that sells t-shirts and crafts on Etsy and accept payments through third-party apps.
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He walks dogs or cleans houses as a sideline and gets paid by his clients through Venmo or a similar platform.
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You are a freelancer who gets paid through Venmo.
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You sell your old sofa for more than you paid for it and the buyer collects the payment.
Keep in mind that these tax reporting requirements apply no matter how you receive the money you earned. You must report income and profits to the IRS and pay taxes on that money. It doesn’t matter if you get paid in cash or via check, direct deposit, credit card, or a third-party app. These requirements do not change much from year to year.
Here’s where it gets confusing, though: The rules for when payment apps must report your income to the IRS and provide you with tax documents are changing.
Read more: Can you use a credit card on Venmo?
Taxpayers who get paid through third-party apps like Venmo, Zelle, or PayPal, and those who receive payments with credit cards, debit cards, or gift cards, may receive a tax document called Form 1099-K. In some circumstances, a payment processing company or third-party application will send information about the money you earned to the IRS via Form 1099-K and send you a copy by January 31 for the previous calendar year.
What’s changing is that the IRS is lowering the Form 1099-K reporting thresholds for Venmo, PayPal, and similar apps.
The American Rescue Plan, a COVID-19 relief package passed in 2021, included a provision requiring payment services like Venmo to provide users with the 1099-K tax form if they had business transactions of $600 or more.
The new rule was originally scheduled to go into effect for the 2022 tax year, but the IRS delayed its implementation due to concerns about taxpayer confusion. For example, many people casually sell personal items, such as clothing or furniture, for less than they paid, which should not result in a tax bill. However, many people could have received a Form 1099-K if they had made similar transactions that exceeded $600.
In late 2023, the IRS announced that it would once again delay the higher reporting threshold for another year and phase in the lower requirement. That meant payment platforms only had to send you a 1099-K form if you had payment transactions for goods and services sold that exceeded $20,000 and more than 200 transactions (although some states have lower thresholds). You will also receive a 1099-K if you are subject to backup withholding, which the IRS may require if you have not provided an accurate tax identification number or if you have not reported dividend or investment income in the past.
As part of its phased approach, the IRS is implementing the following lower thresholds:
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For 2024 (applies to tax returns due April 15, 2025), you should have received a 1099-K if your payments from third-party platforms exceeded $5,000.
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For 2025 (applies to tax returns due April 15, 2026), you will receive a 1099-K if your payments from third-party platforms exceed $2,500.
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For 2026 (applies to tax returns due April 15, 2027), you will receive a 1099-K if your payments from third-party platforms exceed $600.
These thresholds apply regardless of the number of transactions.
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If you are self-employed and earn business income through Venmo, or sell items for a profit, there is no getting around the fact that you will have to pay federal taxes on that money. You will need to report that income when you file your taxes, even if you do not receive Form 1099-K. Consult a tax professional if you have any questions about whether a transaction counts as taxable income.
You can’t avoid taxes by turning to a different payment app. Other peer-to-peer payment platforms, including PayPal, Stripe, and Square, are subject to the same rules. And you are responsible for reporting the money you earn and paying taxes on it regardless of how you are paid, even if you don’t receive a 1099-K.
That said, there are some situations where you may face a tax bill for a Venmo transaction even though you have no tax liability.
Make sure payments your friends and family send you as gifts or refunds aren’t accidentally labeled as “goods and services.” If the mislabeled personal transactions exceed the reporting threshold for the year ($5,000 in 2024), you may be issued a Form 1099-K, even though these transactions are not taxable. Plus, you’ll pay fees for transactions that should be fee-free. If someone sent you a payment that was inadvertently labeled as goods and services, ask them to contact Venmo to correct the error.
You can generally avoid paying taxes on Venmo transactions if you sell items for less than you paid. If you sold items worth less than $5,000, you should not receive a 1099-K for 2024. But as new reporting requirements take effect, you will receive one for 2025 if your sales exceed $2,500 and one for 2026 if your sales exceed $600.
Getting a 1099-K doesn’t necessarily mean you owe taxes. For example, let’s say you paid $30,000 for your car and then sold it on Venmo for $23,000. Even if you received a 1099-K from Venmo, you can report the loss when you file your return and avoid any tax liability. It is essential to keep records of how much you paid for any items you eventually sell. Consult with a tax advisor to ensure you don’t end up with an unnecessary tax bill.
Read more: How to File Taxes as an Independent Contractor
You must pay taxes on the money you earned through Venmo in 2024, as well as other tax years. However, the IRS has delayed implementing the new Form 1099-K reporting thresholds. Most taxpayers will only receive a 1099-K tax form for 2024 if they received more than $5,000 in Venmo payments for goods and services. But you’re still responsible for reporting Venmo income below these thresholds and paying taxes on that money, even if you don’t receive Form 1099-K.
The $600 tax rule is a new rule that will eventually require third-party payment apps like Venmo, PayPal, and Cash App to submit Form 1099-K for any user who earns more than $600 on the platform during a tax year. The new rule is being rolled out gradually, so this tax season it will only affect users who earned more than $5,000 on the platforms. A lower threshold of $2,500 will apply for FY 2025 before the $600 final rule takes effect for FY 2026.
You will receive a profit and loss statement from Venmo if you sold cryptocurrency using the platform. Regardless of which platform you use to sell cryptocurrency, your profits are subject to capital gains taxes. You may be able to offset some of your gains through capital losses, so check with a tax professional about the rules.