Is bartering taxable income?

What the rule says

Publication 525, in its Bartering section, defines bartering as an exchange of property or services. The rule is short: you must include in your income, at the time received, the FMV of property or services you receive in bartering. Nothing in the rule depends on cash changing hands. A trade of an hour of design work for a month of bookkeeping is two taxable events, one for each person, and each person counts the FMV of what came in.

The second sentence of the rule matters for informal swaps. If you exchange services with another person and you both have agreed ahead of time on the value of the services, that value will be accepted as FMV unless the value can be shown to be otherwise. In practice, a written note of the agreed values at the time of the trade is the cleanest evidence of what to report.

Where barter income is reported

Pub. 525 says you generally report this income on Schedule C (Form 1040). That fits the usual case, a self-employed person trading services. The publication adds an exception: if the barter involves an exchange of something other than services, you may have to use another form or schedule instead. Its Example 23 shows what that means. An apartment-building owner receives a work of art in return for six months of rent-free use of an apartment. The owner reports the FMV of the artwork as rental income on Schedule E (Form 1040), and the artist reports the fair rental value of the apartment as income on Schedule C.

Examples from Publication 525

• Services for stock (Example 20). A self-employed attorney performs legal services for a small corporation and is paid in shares of its stock. The attorney includes the FMV of the shares in income on Schedule C in the year they are received.
• Services for services (Example 21). A self-employed accountant and a house painter are members of a barter club. The painter paints the accountant’s home in return for accounting services. The accountant reports the FMV of the painting services as Schedule C income, and the painter reports the FMV of the accounting services.
• Barter credits (Example 22). A barter club adds credit units to a member’s account for goods or services the member provides, which can be spent with other members. The member must include the value of credit units added to the account, even if no goods or services are received from other members until a later tax year. The income arises when the credits are added, not when they are spent.
• Art for rent (Example 23). Described above: Schedule E for the building owner, Schedule C for the artist.

Form 1099-B from a barter exchange

If you exchanged property or services through a barter exchange, Pub. 525 says a Form 1099-B or a similar statement should be sent to you by February 15, 2026 for 2025 exchanges. It should show the value of cash, property, services, credits or scrip you received from exchanges during 2025, and the IRS also receives a copy. Direct swaps between two people, such as the painter and the accountant, do not produce a 1099-B, but the income rule is the same.

Backup withholding on barter income

In most cases, the income you receive from bartering is not subject to regular income tax withholding. Backup withholding applies in two situations, and the barter exchange must then withhold 24% of the income: you do not give the exchange your taxpayer identification number (TIN), or the IRS notifies the exchange that the TIN you gave is incorrect. If you join a barter exchange you must certify under penalties of perjury that your TIN is correct and that you are not subject to backup withholding, usually on Form W-9 or a similar form; if you do not, backup withholding may begin immediately. The exchange withholds only up to the amount of any cash paid or deposited and any scrip or credit issued to you and converted to cash. Withheld tax is reported on Form 1099-B or a similar statement.

Worked example

A freelance photographer shoots a restaurant’s menu photos. They agree in writing that the shoot is worth $1,500, and the restaurant provides $1,500 of catering credit. The photographer includes $1,500 as Schedule C income for the year the credit is received, and the restaurant includes the $1,500 FMV of the photography services as its own income (or treats it as a business expense, if it qualifies). If the photographer instead joins a barter exchange and fails to provide a TIN, the exchange must withhold 24% of a $1,500 credit that is converted to cash, which is $360, up to the cash paid or deposited.

Limits of this page

This page covers only the Bartering section of Publication 525 (2025), which is written for 2025 returns. It does not address how to value unusual property, whether an exchange qualifies as a like-kind exchange, or state tax and sales tax on bartered goods. Those need the specific publication or a tax professional.

Related Publication 525 topics

More from the same IRS publication: Is restricted stock taxable income?, Is forgiven debt taxable income?, Are royalties taxable income?.

Sources

• IRS Publication 525, Taxable and Nontaxable Income (2025): the “Bartering” section and the sections it cross-references. Read November 2, 2026.

Edition read: Publication 525 (2025), for use in preparing 2025 returns. Dollar limits and dates in this publication are for 2025; check the current publication and form instructions for your tax year. This page summarizes the publication and does not replace it.