Garage sale profits are taxable income
UPDATE 11/11/2009: I answered the question "is garage sale income taxable?" a couple years ago. This answer was based on my own experience at the time. At the time I wrote the response, I based it on my own experiences and on the specific question asked by the "asker." The IRS has since offered a clearer answer, and indicates that not all garage sale income is necessarily taxable. It depends upon the circumstances. Please read the IRS page for more information.
We didn't receive a new tax question for the last few days, but now they're rolling in again. So we're back, and ready to answer this one for Michelle in Wisconsin.
Q: I held a garage sale this summer to clear out some of the extra "junk" we'd been collecting around the house for years. I think we made about $650 in three days. Do we have to pay income taxes on this?
A: Ah...garage sales are one of those wonderful traditions we love. I look forward to them every spring and summer and always make sure I stop to browse at a few. You never know what you might find!
But just like any other business, any income you make at a garage sale is taxable. Plus, you don't have the benefit of being able to write off any sort of business expenses or losses (unless perhaps you paid $10 for a classified ad in your local newspaper). So, make sure you report that income, Michelle.
But what if I told you there's an even better option to having a garage sale? Have you considered just packing all of that extra "stuff" into your car and driving it down to your local Goodwill, Salvation Army store or charity?
Many charities accept all kinds of donations - clothing, furniture, electronics, household items - and will give you an itemized receipt, which you can then use to determine the value of your donation and write it off your taxes.
It's tempting to hold that garage sale and put a few hundred dollars of cash in your pocket. But you may find that donating the items actually saves you more money on your taxes than you'd make by selling them and paying income taxes on the profits. Plus you'll have the added satisfaction of helping out the less fortunate among us and it won't take up your entire weekend, which gives you time to go out and do some garage sale shopping of your own!
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We didn't receive a new tax question for the last few days, but now they're rolling in again. So we're back, and ready to answer this one for Michelle in Wisconsin.
Q: I held a garage sale this summer to clear out some of the extra "junk" we'd been collecting around the house for years. I think we made about $650 in three days. Do we have to pay income taxes on this?
A: Ah...garage sales are one of those wonderful traditions we love. I look forward to them every spring and summer and always make sure I stop to browse at a few. You never know what you might find!
But just like any other business, any income you make at a garage sale is taxable. Plus, you don't have the benefit of being able to write off any sort of business expenses or losses (unless perhaps you paid $10 for a classified ad in your local newspaper). So, make sure you report that income, Michelle.
But what if I told you there's an even better option to having a garage sale? Have you considered just packing all of that extra "stuff" into your car and driving it down to your local Goodwill, Salvation Army store or charity?
Many charities accept all kinds of donations - clothing, furniture, electronics, household items - and will give you an itemized receipt, which you can then use to determine the value of your donation and write it off your taxes.
It's tempting to hold that garage sale and put a few hundred dollars of cash in your pocket. But you may find that donating the items actually saves you more money on your taxes than you'd make by selling them and paying income taxes on the profits. Plus you'll have the added satisfaction of helping out the less fortunate among us and it won't take up your entire weekend, which gives you time to go out and do some garage sale shopping of your own!
posted by Scott at
5:05 AM
5 Comments:
Why should taxes be paid on that "income", when in fact those goods were bought with income that was already taxed? Most items at garage sales are sold for far less than their original purchase price, thereby incurring a loss, not a profit.
I agree with Thoric. Why get whacked twice? The Government has so many BS rules these days, but seriously, even if you made $650 at a yard sale selling your old crap, you could spend that in a night, all cash, an no one would ever know. Just go out and have that elegant dinner you've always wanted or buy a new big screen tv. Who's the Government to say we're coming to get our percent on your sale. Screw them!
http://www.irs.gov/businesses/small/industries/article/0,,id=202939,00.html
"If your online auction sales are the Internet equivalent of an occasional garage or yard sale, you generally do not have to report the sales. In a garage sale, you generally sell household items you purchased over the years and used personally. 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."
Just one caveat:
"Sales of Appreciated Assets at an Online Auction
Examples of appreciated assets often include art, antiques and collectibles. 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."
Some chronic garage salespeople are getting free stuff and selling it for a higher price. Some even rent their videos and sell expired nutrition products repackaging them and reselling them for a much higher profit.
The original answer given to Michelle in Wisconsin is Inaccurate.Any time an individual purchases a personal use item and later decides to sell it they could potentially have a gain or loss. Notice "a gain or loss".Thus indicating an original Cost or Basis in the item.A loss on personal use items can not be claimed as a deduction.However according to the Letter of the Tax Law if you have a gain on even a personal use item it is supposed to be reported as income.So if I purchase a blouse for $15.00 and sell it for %1.00 I have a loss therefore no gain is reported. I'd like to see the Wheeler and Dealer that can sell Garage Sale items for more then what was originally paid.I'll hire them to run my next Garage Sale.Hmmm...Then will I have to 1099 them? Ha,Ha
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