06 Dec Ebay Taxes: How Selling Online Affects Your Return
You have some junk lying around. You want to get rid of it. That’s where websites like eBay come in to help you part with your junk and make a little extra cash along the way. It’s easy, convenient, and usually reliable. With the holidays in full swing, using selling websites is a smart way to give yourself some more money for gifts.
However, what most people aren’t aware of is how selling items online can affect their return. These special “eBay taxes” can sneak up on some people, putting them in a bad spot during tax season. While not many people get audited just neglecting taxes for selling junk, it’s better to know what the rules are and save yourself the trouble.
Capital Gains for Most Cases
The type of “eBay taxes” you’ll need to pay is dependent on how you’re selling. If you’re just selling occasional junk just to have some cash in your hand, then you’ll either not pay any tax at all, or have to pay capital gains.
It works like this: if you sell an item for less than what you paid for it, then you don’t owe any tax. If you bought a smartphone for $200 and sold it online for $50, then you don’t have to worry about a thing. If in some stroke of luck, you actually profit on selling something, the difference should be reported as capital gains. The same smartphone you bought for $200, if you sold it for $300, you would have to pay capital gains tax on that $100 you made (the $100 is your capital gain).
Capital gains are reported on the Schedule D of your form 1040.
If You Sell Frequently, You’re a Business Owner
Some people find success using sites like eBay. Whether it be flipping gadgets or selling custom items on Etsy, some people make quite the profit on these websites. However, that means that the IRS treats those people differently. Pay attention if selling items online is a side-gig or a full-time job for you. If not, then feel free to skip over this section.
The IRS will treat you as a sole proprietor, in this case, meaning that all your costs and profits should be reported on a Schedule C of your 1040. Between the two types of online sellers, it’s the small business owners who have a greater risk of an audit. You have to properly track your expenses, write down everything you made, and so forth. You’ll also need to double-check if the site you’re using charges you sales tax for the state you live in. If not, then you’ll have to allocate and pay it yourself. If you want to know more about that, click this link.
Need some tax advice now or have questions about eBay taxes? Give us a call at 614-524-4888!