Yard sales taxable? Maybe

Many people plan a yard or garage sale while the weather is nice. Have you ever wondered how taxes affect these events?

In most cases, these types of sales involve personal items that you've owned and used for a number of years. Since the selling price is generally lower than your original cost, the sales are generally tax-free. You have no profit on the sale, and losses on the sale of personal-use property are not deductible.

On the other hand, if you sell an item, such as an antique or a collectible, for more than you paid for it, your gain must be reported as income. This income is either business income or capital gain income, depending on whether your sales rise to the frequency of a business venture.

If you sell assets formerly used in a business, you may have capital gains, ordinary gains and depreciation recapture to report. Examples include the sale of an automobile or computer you previously used in your business.

If you regularly sell items at flea markets, farmer's markets or craft fairs, you will probably need to report your profits and losses, pay self-employment tax and possibly collect sales tax. It's also possible that your tax deduction for your annual loss may be limited by the "hobby loss" rules.

If you have unsold items left over from your yard sale, and they are in "good used" condition, and if you itemize deductions, consider donating the items to charity to claim a deduction based on their fair market value. Be sure to keep a record of your donations and obtain receipts from the charity.

More information is available from the IRS at "Tips for Online Auction Sellers" at www.irs.gov/businesses/small/industries/article/0,,id=202939,00.html.

© 2018 Apex CPAs & Consultants, Inc.   |   1652 E. Main Street, Suite 100, Saint Charles, Illinois 60174  |   Tel 630.584.4555
Admin   |   Upload Docs  |   Client Login