Do You Have to Pay Taxes on Cash App Transactions? Here’s What the IRS Says

Key takeaways

• Personal transactions like splitting bills or receiving gifts aren't taxable income
• The IRS required Cash App to report business income over $5,000 for 2024 using Form 1099-K
• For 2025 and beyond, the threshold is now $20,000 AND 200 transactions after Congress passed new legislation

Getting a 1099-K form from Cash App can feel like a curveball, especially if you thought your side hustle or occasional sales were flying under the radar. But here's the reality: the IRS has changed how payment apps report your transactions, and ignoring these rules could cost you.

Whether you're splitting rent with roommates, selling old textbooks, or running a small business through Cash App, understanding what's taxable (and what isn't) will save you from nasty surprises come tax season.

What Cash App transactions are actually taxable?

Not every dollar that hits your Cash App account triggers a tax bill. The IRS only cares about income, and personal transfers don't count.

Personal payments (NOT taxable) are things like:

• Birthday money from grandma
• Your roommate's share of the electric bill
• Friends paying you back for pizza
• Someone reimbursing you for concert tickets you bought

Business payments (YES, taxable) include money you earn from:

• Selling handmade jewelry or crafts
• Freelance work, like graphic design or writing
• Tutoring other students
• Reselling sneakers or electronics for profit
• Pet sitting or dog walking

Here's the simple test: If you're getting paid because you provided something valuable (a product or service), that's taxable. If someone's just paying you back or being generous, you're good.

Understanding the 1099-K reporting threshold (and what changed in 2025)

The 1099-K reporting threshold has been a moving target over the past few years. Here's the full story of what happened:

The original plan (2021)

The American Rescue Plan Act of 2021, under the Biden Administration, set the 1099-K threshold at $600 with no transaction minimum, scheduled to take effect in 2022. However, the IRS repeatedly delayed implementing this lower threshold due to concerns about taxpayer confusion and the administrative burden.

What actually happened for 2024

For 2024 taxes (the ones you filed in early 2025), Cash App sent you a 1099-K if you received more than $5,000 in business transactions.

The IRS plan for 2025-2026 (November 2024)

In November 2024, the IRS issued Notice 2024-85, which announced a phased approach:

• 2024: $5,000 threshold
• 2025: $2,500 threshold
• 2026 and beyond: $600 threshold

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Congress changes course (July 2025)

But then Congress passed the One Big Beautiful Bill Act (OBBBA) on July 4, 2025, which permanently repealed the $600 threshold requirement. This new law retroactively set the threshold back to the pre-2021 levels: more than $20,000 in business payments AND more than 200 transactions.

This means for 2025 and all future years, Cash App will only send you a 1099-K if you meet both criteria: over $20,000 in payments AND over 200 transactions.

The critical point most people miss

Here's the part that trips people up: just because you don't get a 1099-K doesn't mean you're off the hook. Made $2,000 tutoring? You still owe taxes on it. Made $50 selling old video games? Technically, you should report that too.

TuitionHero Tip

The 1099-K is just Cash App reporting to the IRS about your transactions. It's not permission to ignore smaller amounts.

How to mark payments correctly in Cash App

Cash App gives you control over how payments are labeled, and this matters way more than you think.

When you receive money, Cash App asks whether it's for goods and services or if it's personal. Your answer affects whether the payment counts toward your 1099-K threshold.

• For business transactions: Select "goods and services" when you're getting paid for something you're selling or a service you're providing. Cash App takes a small fee for business payments, but marking them correctly keeps your records clean.
• For personal payments: Choose the personal option when friends pay you back for stuff or send you gift money. These don't count toward business income reporting.

TuitionHero Tip

If you mess this up, you can't easily fix it later. Cash App won't let you change payment types after the fact, which is why paying attention upfront saves major headaches during tax season.

What Form 1099-K tells you (and what it doesn't)

If you hit the reporting threshold, Cash App sends you Form 1099-K by January 31st. This form shows your total gross receipts from business transactions.

Think of it like a report card that Cash App sends to both you and the IRS. It shows the total amount of business payments you received.

But here's the catch: this number might not match your actual taxable income because it doesn't subtract your business expenses, refunds, or incorrectly marked personal payments.

Your 1099-K shows:

• Total payment volume for the year
• How many transactions you had
• Your tax ID or Social Security number
• Cash App's information as the payment processor

What it doesn't show: Money you spent on supplies, cost of items you resold, or personal payments that accidentally got counted. You'll need to figure out your actual profit separately when filing taxes.

TuitionHero Tip

If your 1099-K looks wrong (maybe personal payments got counted), contact Cash App immediately to request a correction. The IRS gets the same form, so mismatches can trigger questions.

Keeping records that actually protect you

Good recordkeeping isn't just for people with fancy accounting degrees. Even if you're casually making side money, documentation matters.

• Save every transaction detail: Download your Cash App transaction history regularly. The app lets you export everything to a spreadsheet. Store these somewhere safe because you'll need them to calculate actual taxable income and defend yourself if the IRS asks questions.
• Track what you spend to make money: Sold $3,000 worth of refurbished phones through Cash App? If you spent $2,200 buying those phones originally, your taxable income is only $800. Keep receipts for everything: supplies, shipping costs, Cash App fees, even gas money if you drive to make sales.
• Keep business and personal separate: If possible, use different Cash App accounts or payment methods for business versus personal stuff. This makes tax time way easier because you're not digging through months of roommate payments to find your actual business income.

How this affects students and side hustlers

If you're in high school or college and using Cash App for occasional sales or gig work, taxes probably weren't on your mind. They should be. Here's what counts as taxable for students.

Definitely taxable:

• Tutoring younger students (even if it's just SAT prep)
• Selling stuff you made (art, jewelry, baked goods)
• Freelance work (writing, graphic design, coding)
• Regular babysitting or pet sitting
• Reselling items for profit (like buying clearance items and flipping them)

Usually not taxable:

• Selling your used textbooks or furniture for less than you paid
• Getting reimbursed for a group dinner
• Receiving graduation money from relatives
• Your share of shared expenses

If you're still a dependent on your parents' taxes, you might still need to file your own return if you made enough money (usually over $13,850 for 2024). Your parents can still claim you, but you report your own income separately.

Reporting Cash App income on your tax return

When tax season rolls around, you'll need to report your Cash App income correctly.

Most Cash App business income goes on Schedule C, which is basically a form where you report money earned from self-employment. You list how much you made, subtract what you spent to earn it, and that final number is what you actually owe taxes on.

Here's the math:

• Total Cash App business income: $4,000
• Minus business expenses: $1,500
• Equals taxable income: $2,500

If your net self-employment income is more than $400, you'll also owe self-employment tax, which covers Social Security and Medicare. This is separate from regular income tax and catches people off guard.

Sold personal stuff at a loss? If you sold your old Xbox for less than you originally paid, you typically don't owe tax. If you somehow sold it for more than you paid, you might owe capital gains tax depending on the situation.

Students juggling loans, work-study, and side hustles can find budgeting tools and financial planning resources at TuitionHero to help balance earning money with staying on top of tax stuff.

Do's and don'ts of managing Cash App taxes

What happens if you don't report Cash App income

Skipping out on reporting taxable Cash App income isn't a small mistake. The IRS has ways to catch unreported income, especially now that payment apps report directly to them.

If the IRS notices income on a 1099-K that you didn't report, expect a letter proposing additional tax, plus interest and penalties. You'll need to either pay up or explain why the income shouldn't be taxed.

Penalties stack up quickly:

Tax debt doesn't disappear. The IRS can garnish wages, freeze bank accounts, or file liens against property. For students, unpaid tax debt can even mess with financial aid or cause problems with future job background checks.

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Frequently asked questions (FAQ)

Do I owe taxes on money my roommate sent me for rent?

Nope. Reimbursements for shared expenses like rent, utilities, or groceries aren't taxable income. These are personal transfers, not payments for goods or services. Just make sure you mark them as personal payments in Cash App.

What if I received a 1099-K but some payments were actually personal?

Contact Cash App support right away to request a corrected form. When filing taxes, only report your actual business income and keep documentation showing why certain payments were personal. You might need to attach an explanation showing the difference between your 1099-K and what you're reporting.

Can I deduct the fees Cash App charges for business transactions?

Yes. Business transaction fees are deductible business expenses. Track these throughout the year and subtract them when calculating your income. Every fee reduces what you owe taxes on.

Do I need to report income from selling used personal items?

It depends. If you sold items for less than you originally paid (like used furniture, clothes, or electronics), you don't owe tax. If you sold something for more than you paid, you might owe capital gains tax. Items sold regularly as part of a business (like flipping items for profit) are always taxable.

What happens if I made less than the 1099-K threshold but still earned taxable income?

You still must report it. The threshold only determines whether Cash App sends you a 1099-K form. All taxable income must be reported regardless of amount. If you earned $2,000 from freelance work through Cash App, you owe taxes on that income even though you won't get a form.

Final thoughts

Tax rules around payment apps feel unnecessarily complicated, but the main idea is simple: income is income, no matter how you receive it. The payment method doesn't change whether you owe taxes.

The good news? Most personal transactions students make through Cash App don't cause any tax problems. Splitting costs with friends, receiving gifts, or getting reimbursed for expenses you covered are all tax-free.

Where things get real is side hustles, freelancing, and selling stuff for profit. These activities create taxable income no matter how you get paid. Staying organized, marking payments correctly, and keeping records throughout the year makes tax season manageable instead of overwhelming.

Learning these financial rules early, whether you're earning money for textbooks or running a business on your phone, ensures you stay compliant with the IRS and maximize your earnings as your income increases.

Source

• New 1099-K Reporting Rules If You Get Paid Through Venmo, Cash App, PayPal | Bankrate
• 1099-K tax rules: What to know if you get paid via Venmo or PayPal
• Current Form 1099-K Reporting Thresholds 2024 Update | PayPal US
• Venmo Tax FAQ
• One Big Beautiful Bill Act changes 1099 thresholds — Avalara