Selling your personal baseball card collection can be a great way to make some extra cash, especially if you have some rare and valuable cards. When you start selling cards on a regular basis, the IRS may consider your activities as a hobby or even a business. So the question comes up – is selling baseball cards taxable? Here is a comprehensive look at the tax implications of baseball card sales.
The first thing to understand is that occasional personal sales of your cards are generally not considered taxable by the IRS. For example, if you sell a few cards from your childhood collection on eBay just to declutter, that likely would not be viewed as a taxable activity. If you start buying and selling cards on a regular basis with the goal of making a profit, the IRS may classify those activities as a “hobby” or a “business.”
If the IRS considers your baseball card sales a hobby, then you are able to claim expenses up to the amount of income you earn. You cannot report a loss or carry over losses to future years. Any income from hobby sales over expenses must be reported as Other Income on your tax return. Some factors the IRS may use to determine if it’s a hobby include:
Do the activities actually make a profit in 3 of the last 5 years, including the current year?
How much time do you devote to the activities? Are the activities done regularly or just for fun/recreation?
Are the activities designed to make a profit? Or is the primary goal just a hobby or pastime with any profit being a secondary goal?
On the other hand, if the IRS classifies your card sales as a business based on the frequency and intent to profit, then you have more reporting requirements and tax implications to consider. As a business:
All business income must be reported on Schedule C along with your Form 1040.
You can claim business expenses and potentially show a loss to offset other income. Losses can be carried forward to future years.
You may need an Employer Identification Number (EIN) depending on the level of income.
You are responsible for self-employment taxes which include both the employer and employee portions of Social Security and Medicare taxes (15.3% total). These are reported on Schedule SE.
You may also need to pay estimated quarterly taxes if your tax liability exceeds $1,000.
In addition to the business/hobby classification, another scenario is if you sell cards that you purchased specifically to resell for a profit within a short time period. For cards purchased with the intent to flip quickly, any profits would be considered self-employment income and taxed accordingly versus being taxed at the capital gains rate.
Some helpful strategies if you want to avoid a “business” designation by the IRS include:
Keep good records of all income and expenses including purchase and sale prices of individual cards.
Only purchase and sell a few high value items per year instead of many low or mid-value cards.
Advertise or market your sales occasionally but don’t run it like an active ongoing business operation.
Show that you have another primary source of income that takes up most of your time. Keep card sales as a side activity.
Occasional personal sales of baseball cards are generally not taxable but regular sales done with the intent to profit may be considered a hobby or business by the IRS. Knowing the tax classification and implications up front can help you avoid any surprises when tax time rolls around. As always, it’s best to consult a tax professional if you have any substantial card sales in a given year. Proper record keeping is also important to substantiate your activities to the IRS if ever questioned.
