Selling items such as baseball cards on eBay is a popular way for collectors to dispose of duplicate cards or make some extra money. When you start earning income from selling cards or other collectibles, you need to be aware of your tax obligations. Below is an overview of the main tax considerations and requirements for selling baseball cards on eBay.
As with any self-employment or side business, earnings from selling baseball cards on eBay are considered taxable income by the IRS. Even if it’s just a hobby or you only earn a small amount, you are still required to report any profits on your annual tax return. The good news is that you can also deduct any business expenses to help reduce your tax liability.
To determine your taxable profit, you need to track both your gross earnings from sales throughout the year as well as any related costs. On your tax return, gross earnings will be reported on Schedule C as part of your total business income. Costs that can be deducted include the price you paid for the cards when you purchased them initially, shipping and packaging supplies, payment processing fees, advertising, and other legitimate business expenses.
For most collectors and casual sellers, the income and expenses will likely result in a small net profit that can be reported on Schedule C along with your W-2 income. You file as sole proprietor using your Social Security number as the business EIN. If net annual profits exceed around $400-600, you may need to pay self-employment taxes as well.
Once annual net earnings from selling cards on eBay pass the $400 threshold, you are considered a self-employed individual by the IRS. As such, you’ll need to pay self-employment tax in addition to income tax on your profits. Self-employment tax is comprised of the combined 15.3% social security and Medicare taxes usually split between employers/employees. As a self-employed “business owner,” you pay the full amount on your own.
The IRS requires all business income of at least $600 or net profits of $400 or more to be reported even if no tax is due. A Form 1099-K may also be issued if your third-party payment processors like PayPal handle over 200 transactions totaling more than $20,000 in gross payments. This form helps ensure you properly report all sales income received through such services.
Regardless of income amount, all sellers need to keep thorough records of all card purchases, inventory, sales, expenses, etc. Receipts for any supplies, shipping costs, and other legitimate deductions should be retained for at least 7 years in case of an IRS audit. Maintaining organized records over multiple years is crucial for preparing an accurate tax return. Failure to properly report income or document expenses can result in penalties and back-owed taxes, interest, and fees.
While generally considered a hobby, the IRS may view baseball card selling as a business if it shows signs of being carried on in a businesslike manner for profit. Factors they examine include maintaining inventory records, marketing efforts, number of hours spent, frequency/regularity of sales, and goals of significantly growing sales and earnings over time. Viewing it as a business requires paying quarterly estimated taxes and likely additional documentation for an audit.
If after careful tracking, your gross receipts are less than total costs, you may end up with a small loss from selling cards on eBay for the year rather than a profit. In this case, you would still report the activity on Schedule C but the net loss can be used to offset other taxable income like a regular job and potentially receive a small tax refund. Just be sure to document expenses thoroughly in case of an audit to prove the reported loss.
Income and potential profit from selling baseball cards and other collectibles on eBay holds tax responsibilities. While the task of record keeping may seem daunting, organizing sales and expense records will pay off come tax time. Taking the steps to properly report income and document costs helps ensure full tax compliance while maximizing any deductions to ease your overall tax burden each year. Consulting a tax professional is also advisable if you have any other questions to avoid any penalties or issues down the road.
