Tax Implications of those E-Bay Auctions

The IRS added a new article to its website, to help those of us who emptied out the garage or storeroom by selling unwanted items on E-Bay or other online auctions. The article outlines the required tax reporting on those sales.

Generally, if you sold personal items for less than you actually paid for it, then you don't have to do anything. :)

But if you sold personal items that appreciated in value have to report any gain. If it's art, antiques or other collectibles you pay the 28% tax rate. Otherwise you'll pay the normal capital gains rates.

If you sold business property the rules are a little different. If the item was previously depreciated and you received more than your adjusted basis in the property then all or part of the gain is reported as ordinary income. See IRS Publication 544, Sales and Other Dispositions of Assets, Chapter 3, for more information. But if you sold the property for less than your adjusted basis, your business gets to include the loss.

If you run an visible online auction seller business you have to report your income and expenses as any other business does. See the IRS Small Business Portal for more information on running your business.

The IRS also warns of several tax-abuse schemes promoted toward home-based businesses including online auction sellers. Some of these are outlined in IRS publication 4035, Is It Too Good To Be True? Home-Based Business Tax Avoidance Schemes. The IRS is very serious about these, so don't even try them.