1099-K Threshold in 2026 for Spiritual Practitioners: $20,000 Rule Restored, What You Actually Owe
OBBBA reversed the $600 threshold back to $20,000 and 200+ transactions for 2025 returns. Crypto, Schedule C, SE tax - what spiritual sellers owe.
For most of the past few years, spiritual practitioners feared the $600 threshold - a rule that would have sent a 1099-K to anyone who received $600 through Venmo, Gumroad, or PayPal. That rule was reversed. The One Big Beautiful Bill Act (OBBBA), signed in July 2025, restored the original threshold: $20,000 AND 200 or more transactions through a Third-Party Settlement Organization (TPSO) for tax year 2025 (the returns you file in early 2026).
That does not mean you owe less. All income is taxable regardless of whether a 1099-K arrives. This guide covers exactly what the threshold restoration means, what state exceptions apply, how crypto payments are taxed differently, and what deductions are actually available to self-employed practitioners.
The 1099-K Threshold: What Changed and When
A Form 1099-K reports payment card and third-party network transactions. For tax year 2025, the federal TPSO threshold is:
- $20,000 in total payments, AND
- 200 or more transactions
Both conditions must be met. If a TPSO processed $25,000 of your sales but only 150 transactions, no 1099-K is required. If it processed 300 transactions but only $15,000 total, same result.
This threshold applies to Third-Party Settlement Organizations specifically - platforms like Venmo, PayPal, Cash App, Gumroad, and Payhip. Payment card processors (Stripe, Square) are not TPSOs. They have always been required to issue 1099-K for any card processing volume, with no transaction minimum. If you accept cards through Stripe, you receive a 1099-K regardless of volume.
Why this matters for the 1099-K you may or may not receive - NOT whether you owe tax:
All income is taxable whether or not a 1099-K is issued. A practitioner who receives $15,000 through PayPal in 300 transactions - just under the dollar threshold - owes tax on all $15,000. The 1099-K threshold only determines whether the platform sends a form to you and the IRS. It does not change what you owe.
Source: IRS newsroom "IRS issues FAQs on Form 1099-K threshold under the One Big Beautiful Bill" (2025); avalara.com "One Big Beautiful Bill Act 1099 reporting threshold" (2025).
State Exceptions: Three States Require 1099-K at Lower Thresholds
State tax agencies set their own reporting rules. Three states require TPSO 1099-K reporting below the new federal threshold:
State | TPSO reporting threshold |
|---|---|
Massachusetts | $600 |
Maryland | $600 |
New Jersey | $1,000 |
Platforms like PayPal and Gumroad may issue state-specific 1099-K forms to Massachusetts, Maryland, and New Jersey residents at these lower thresholds even though no federal 1099-K is required. If you are based in one of these states, expect a 1099-K at the state threshold regardless of federal rules.
Source: 1099online.com "Form 1099-K Threshold" (2026).
Crypto Payments: Different Tax Rules
NowPayments and other crypto payment gateways are treated differently from TPSOs for 1099-K purposes - but the tax obligation is identical.
Crypto is property under US tax law. When you receive a payment in Bitcoin, ETH, or USDT:
- You have income equal to the fair market value of the cryptocurrency on the date you received it
- This income is reportable on Schedule C as self-employment income
- The 1099-K threshold rules do not apply to crypto gateway transactions the same way they do to TPSO platforms - the reporting mechanism is different
- Capital gains for the buyer: a customer paying with BTC they previously purchased has a capital gains event when they spend it. That is the buyer's problem, not yours.
For a practitioner receiving $200 in USDT for a reading: $200 is income on the date received, regardless of whether any form is issued. If the USDT later rises in value and you sell it, the additional gain is a separate capital gain event for you.
Source: IRS 1099-K FAQ (2025); turbotax.intuit.com home office deduction guide (2026).
Schedule C: How Spiritual Practitioners Report Self-Employment Income
Self-employed spiritual practitioners - sole proprietors, freelancers, independent contractors - report business income and expenses on Schedule C (Profit or Loss from Business).
Schedule C attaches to your Form 1040. You report:
- Gross receipts (all income from readings, courses, digital products, coaching)
- Business expenses (deductible items subtracted from gross income)
- Net profit = gross receipts minus deductions
The net profit from Schedule C flows to Schedule SE for self-employment tax calculation.
Self-Employment Tax: The Numbers
Self-employment tax covers Social Security and Medicare contributions that employees split with their employer. As a self-employed practitioner, you pay both halves:
SE tax component | Rate | 2025 income limit |
|---|---|---|
Social Security | 12.4% | Up to $176,100 (2025 wage base) |
Medicare | 2.9% | No limit |
Total SE tax | 15.3% | On net SE income up to $176,100 |
Medicare (above wage base) | 2.9% | On net SE income above $176,100 |
Note: the $176,100 Social Security wage base is the 2025 figure. The IRS typically announces the following year's wage base in October. Check the current IRS Publication 15 or irs.gov for the 2026 wage base when available.
You can deduct half of your SE tax as an above-the-line deduction on Form 1040 (Schedule 1), reducing your adjusted gross income.
Source: IRS 1099-K FAQ (2025); turbotax.intuit.com (2026).
Deductions Available to Spiritual Practitioners
Lowering Schedule C net profit is the most direct lever on SE tax. Common deductions for practitioners:
Home office deduction:
- Simplified method: $5 per square foot, maximum 300 square feet = $1,500/year maximum deduction
- Actual expense method: Form 8829, calculates the percentage of home expenses (rent/mortgage interest, utilities, insurance) attributable to the exclusive-use office space
- The space must be used regularly and exclusively for business - a corner of a bedroom used for work does not qualify; a dedicated reading room does
Business expenses (examples):
- Platform fees (Payhip, Gumroad, NowPayments)
- Course platform subscriptions (Teachable, LearnWorlds)
- Professional tools: AI voice generation subscriptions, design tools, website hosting
- Continuing education: tarot certification courses, astrology programs (if related to your practice)
- Professional books, decks, and reference materials used in your practice
- Health insurance premiums (self-employed health insurance deduction - above-the-line)
Keep receipts. Business expenses must be ordinary and necessary for your practice.
Source: turbotax.intuit.com home office deduction guide (2026).
Practical Summary for 2025 Returns (Filed in Early 2026)
Situation | What to do |
|---|---|
Received a 1099-K from PayPal/Gumroad | Report the income on Schedule C - but also report ALL other income whether or not a form arrived |
No 1099-K received but earned income | Still report all income on Schedule C |
Received crypto payments | Report fair market value of crypto on date received as income on Schedule C |
Based in MA/MD ($600 threshold) | Expect a state-level 1099-K even if no federal form is issued |
Working from home | Consider home office deduction (simplified: $1,500 max; actual: Form 8829) |
Frequently Asked Questions
Does the $20,000 threshold mean income under $20,000 is not taxable?
No. The threshold determines whether a platform sends you a Form 1099-K - a reporting form. All income is taxable regardless of whether any form is issued. A practitioner earning $10,000 from digital readings through PayPal owes income tax on all $10,000 even though no 1099-K was sent.
Gumroad became a Merchant of Record in 2025. Does that change my 1099-K situation?
Gumroad's MoR status means Gumroad is the seller of record for global tax purposes, which affects VAT/sales tax collection. For US federal income tax purposes, the income you receive from Gumroad sales is still your business income, reportable on Schedule C. Gumroad's MoR status does not reduce your income tax obligation - it only means Gumroad handles sales tax collection from buyers.
What if I accept both card payments (Stripe) and crypto (NowPayments)?
Card payments through Stripe: you may receive a 1099-K from Stripe for any card volume (no minimum threshold for card processors). Report all Stripe income on Schedule C. Crypto payments through NowPayments: no 1099-K from NowPayments, but the income is taxable on the date received at fair market value. Keep your own records of crypto payments received, including the amount and value at date of receipt.
I am based outside the US. Do these rules apply to me?
US 1099-K rules and Schedule C filing requirements apply to US persons and US-resident taxpayers. Non-US practitioners based in Argentina, Brazil, or other countries are not subject to these US filing requirements for income earned outside the US. If you are a non-US person earning income from US customers, different withholding rules may apply. Consult a tax advisor familiar with cross-border digital income for your specific situation.