If you’re one of those people who makes more than $20,000 a year selling items on Craigslist or eBay, this blog article is not for you. eBay and Craigslist treat those sellers differently. The big-time sellers should receive a 1099-K showing how much they made in a year. Check back later at Tax Lounge. We’ll tackle the big-time sellers and business income in a separate blog article.
If you’re like the rest of us who make a few dollars here and there, selling things we no longer use, then read on.
The IRS isn’t lurking around your computer mouse to take the little bit you get from eBay sales. In fact, if your online auction sales equate to an occasional garage sale, you generally do not have to report your earnings.
Here’s how the IRS puts it:
“If you paid more for the items than you sell them for, the sales are not reportable. Losses on personal use property are not deductible, either.”
Selling your items at a garage sale follows the same tax guidelines as occasionally selling on an online auction site. You generally do not have to report income since most items are sold at a loss.
However, if you sell items for more than you paid for them, that’s a different story. In that case, the IRS wants its cut.
Here’s what the IRS says about that:
“If you have online auction sales of property where the sales price is more than your cost or other basis, you usually will have a reportable gain. These gains may be business income or capital gains.”
The rules change when you have at least 200 transactions or you make $20,000 in sales. In that case, the IRS treats what you do more as a business, and expects you to abide by the business income rules. As we said, check back at Tax Lounge for an upcoming blog article if this sounds more like you.
Still unsure? It’s best to seek help from a tax professional. Inaccurate reporting could lead to IRS audits and other unwanted things.
Find out all you need to know about the digital economy and your taxes. Check out last week's blog on Etsy income.
Disclaimer: Tax Lounge is an informational source for industry news and related topics. We take every effort to provide honest and accurate tax information, but this information should not be a substitute for professional tax advice. Use our office locator to find your local tax office or subscribe to our free newsletter.