Recently someone posted a comment to a post I made on my consumer blog about the IRS looking at PayPal records for people who are trying to avoid paying taxes on eBay income. Click here to see the post and comment.
This person asked: so if I sell the junk in my basement, I have to pay taxes on it?
The answer is, in most cases no.
The reason is that the IRS has a rule about occasional income, such as the money you might make from garage sales or selling other used personal items. Also, chances are that you’ll get less than you paid for a used item when you sell it, so you’re not making a profit on the transaction that could be taxable income.
It’s a different story if you’re buying someone else’s junk and selling it – that’s a business. eBay sellers who shop at garage sales for items they sell on eBay and other online auctions should be tracking their income and expenses, and then reporting their income appropriately. Another situation where you might have to pay tax on the sale of a personal item is when you have a collectible that has increased in value.
If you’re cleaning out your closets, garage, attic, basement, etc., and make a little money in the process, that’s one thing. If you are running an ongoing business, that’s something entirely different.
And now for the disclaimer: check with a qualified tax advisor if you have any questions.
Jackie
That is a very interesting article. I always wondered if it was taxable or not.
Posted by: Fred333 | January 07, 2008 at 03:16 PM