Making money on EBAY

[cicy33]

That is a true statement but I think it is incomplete. What I would say is that any income you earn on ebay is reportable. That is true whether you make a profit or not. From that income, you can deduct all of your expenses including the cost of the merchandise, ebay fees, paypal fees, postage, office supplies, etc. You would then pay taxes on the net profit.

I think that is an important distinction. When filing taxes, you don't just report profit. You report total income then subtract expenses/deductions and pay tax on what remains.

I believe it is also true, and please anyone correct me if I am wrong, you do not have to report the earnings if you are selling something you already own. Like your kids outgrown clothes.

[disneysteve]

I believe it is also true, and please anyone correct me if I am wrong, you do not have to report the earnings if you are selling something you already own. Like your kids outgrown clothes.

I'm actually not sure if the law says that you don't have to report it. I think it is just one of those things that the IRS chooses to ignore because they have more important concerns and there is no tax liability anyway. There is no profit and no tax deductible loss, so it is a non-issue from a tax standpoint.

HOWEVER, if you were ever to be the victim of an audit, you just might have to substantiate that income. The ideal way of doing so would be to show the original purchase receipts for everything you sold. Since no sane person would have that information, I'm sure they accept some more reasonable documentation. I guess you'd need to somehow prove that you were selling stuff you already owned as opposed to stuff you bought to resell. Lots of folks buy used clothing at yard sales and resell it on ebay. That would create taxable income but would look just like someone selling stuff their own kids had outgrown.

I've actually had a few instances where I made a profit selling my daughter's old clothes. They were items that we had bought secondhand. She wore them for a while and then I ebayed them and made a profit. Can't beat that deal.

[quizbiz]

I have collected all of my high school text books which I lost at the time or was given and I'm going to sell them on ebay. If I'm honest about the condition, I think it should do well. I just need to price it so that I don't pay out of pocket for shipping the hefty books.

I am debating between doing a bundle between all of my SAT related books or doing them one by one. Any advice?

[disneysteve]

I have collected all of my high school text books which I lost at the time or was given and I'm going to sell them on ebay. If I'm honest about the condition, I think it should do well. I just need to price it so that I don't pay out of pocket for shipping the hefty books.

I am debating between doing a bundle between all of my SAT related books or doing them one by one. Any advice?

Definitely weigh them before listing to be sure you are charging proper postage. Ship books by Media Mail for the best rates. In addition to ebay, check half.com. There are also some specialized sites for textbooks but I don't know the URLs.

As for bundling for selling individually, there are pros and cons to each. You'll probably make out better doing them individually. It is easier to find someone looking for one book than a bunch of books.

[KTP]

Hey, so taxes on ebay sales brings up a good question. My wife has a large (I mean LARGE) collection of legos we plan to sell on ebay since we will be moving to a sailboat in a few years. They have been packed up in boxes for many years anyway, so are not doing anyone any good. Just checking 100 or so of the sets in completed auctions on ebay I estimate she would gross about $4000 to $6000 total. She started collecting these sets over 25 years ago, so how does she prove a cost basis in them? Some sets still have a price tag on the box, for example a knight's castle set from the 1980s has a sticker of $19.95 but will probably sell for $80 on ebay. Most of the sets do not have a price and we have no clue how much she paid for them ~25 years ago.

Does the IRS really care about this small stuff?

Edit: Can we add in storage costs for 25 years for the $19.95 set? :-)

[disneysteve]

Some sets still have a price tag on the box, for example a knight's castle set from the 1980s has a sticker of $19.95 but will probably sell for $80 on ebay.

Does the IRS really care about this small stuff?

The short answer is yes, the IRS cares about all of your income. If you sell something for a profit, they expect to get their cut.

Will you get caught if you don't report it? Not likely unless you get audited. If they are reviewing your bank statements in an audit and see an extra $6,000 in undocumented income, that could certainly create a problem.

I run my ebay sales legitimately. I report my income. I deduct my expenses. I collect and submit sales tax. But I realize that the vast majority of ebayers probably do not do that.

[KTP]

I sell some things on ebay in my business and also report profits, deduct costs, collect and send in sales tax. I didn't want to mingle our personal possessions into my ebay business account and so she was going to use hers (she has a 100% positive over 300 feedback like I do, but hers is all from buying small stuff).

When selling personal possessions, would you subtract from the profit of one item the loss on another item? Ie, if we sell a set from the 1980s for a $80 profit, but we sell a mindstorms set we bought in the late 1990s for a $80 loss (realistic...a $200 mindstorms set goes for about $100) would we then have a net gain of $0? Or for personal possessions can you not realize losses to offset gains?

I really wish they would just grant everyone a $10k a year exemption for yard sales, ebay sales, etc...

[disneysteve]

Steve I wanted you to know that , uncirculated Disney currency even if modern issues do command a premium over face value....... if by any chance you come across some , this information can be of use to you , and to all of those who sell , and buy paper currency .

Actually, I've sold Disney dollars on ebay numerous times. I've gotten 3-4 times face value for them.

[jeffrey]

It's also important to remember that if you are going to be doing this as a money maker, you can qualify for a at home business. If you dedicate a room in your house to the business and use it exclusively for it, then you have a lot of tax right offs that would mean you would have to clear quite a bit to actually pay taxes.

For example, if the room was 15% of your total living area, 15% of your mortgage/rent, 15% of your gas bill, 15% of your electricity bill, 15% of your water bill, etc (anything that is essential to keep the house running) could be deducted from any profits you make.

[disneysteve]

Also, jeffrey, your computer and internet access fees. During the years when I was selling on ebay heavily, I wrote off a portion of the cost of the computer and monthly ISP fee.

[wnlbutterfly]

If you are worried about the tax man, you could put ebay income on the "other income" line and declare it.

If you are just selling to unload some clutter, then I wouldn't worry about it, just like a yard sale. They have bigger fish to fry.

BUT I agree, if you have a massive sale and pull in thousands, I would declare that. You would have to estimate your cost in them. Just like coin hobbists, when they sell a coin and if it is more than what they paid, they are suppose to include that gain on their taxes.

Unless you are doing it as a business (conducting it as a business, there are some guidelines at IRS about that), then you do NOT include any losses on your taxes. Again, if your hobby has a loss (which most do), you do not report that loss. But if you are doing a schedule C for a business as PowerSeller for ebay, and had a loss then it would be reported.

Business use of home, schedule C, and can only be used if you have a profit (it deducts after everything else has already been subtracted off). And if you write off your computer and internet, be sure it is only a percentage because IRS is watching that one closely. If you email or even play games on your computer, then it isn't 100% business use.

[KTP]

I think it is called barter and trade, and yes, I think you are supposed to report it. I guess if you swap an item of the same value for another item the net taxable income would be zero.

[davrobins]

ebay is actually a really good way of making money. I made my fair share on there myself.