Before I stopped working for The Man I was a marketer and writer for a tax resolution company; writing thousands of words on the U.S tax code. Along the way I grilled tax attorneys, certified public accountants and IRS agents extensively to come up with the following answers to your top tax questions.
Regardless, I'm not a tax attorney! Follow my sources links for confirmation from the official IRS website to conduct research of your own.
1. Do I Have to Report my Yard/Garage Sale Earnings to the IRS?
According to IRS Publication 525, NOPE! If you're not making more money than you paid for the items you sell at the garage sale, it is not a capital gain and you don't have to report it as income.
2. Sounds Good. But do I need to report my online reselling earnings?
According to the IRS (source) "If your online sales are the Internet equivalent of an occasional garage or yard sale, you generally do not have to report the sales if you did not receive more than you originally paid for the item you sold." If you're making a capital gain from your online reselling efforts, YES! You must report those earnings as a business profit.
3. Well that sucks. But can I take business tax deductions?
If your innocent reselling has evolved into a thriving business, you'd better take advantage of those delicious business tax deductions! Here's some ideas of what you can deduct to get you started:
Electricity/Internet the amount you use exclusively for reselling
Storage Space storage shed or office space rental costs
Mortgage/Rent a portion of your rent/mortgage for any area exclusively for reselling
Subscriptions related magazines, online subscriptions, and accounts for reselling
Cost of Goods the initial cost of the thrift scores you resell
Capital Expenses business start-up costs, assets, and improvements
Check out the IRS article on deducting business expenses for more ideas and information. Starting your business in a way that's A-ok with the IRS is a another article entirely, venture to Starting a Business.
4. Do my purchases from charity thrift stores count as a tax deduction?
Nope! You're making a purchase, not making a donation.
5. Do my donations to thrift stores count as a tax deduction?
Yes! Absolutely, as long as you itemize your tax deductions. Determine the fair market value of each item you donate, make a list, and get a receipt for your donation. The IRS has a detailed article on determining fair market value. For most things, this is the price the thrift store can sell them for. If you're donating pricey valuables, you need appraisals to prove the worth.
Conclusion: Taxes suck! But like a kick in the face from my hero Pimp Daddy Batman, they are unavoidable. Be a super genius ninja like The Batman and use the rules to your advantage. I've seen people successful deduct cat food, poodles, body oil, swimming pools, and boob jobs! So think creatively, and hire a trustworthy certified public accountant if you're in over your head.
Have a very specific question? Call the Taxpayer's Advocate at 1-877-777-4778, they have all the answers.
Fun Extras: The IRS has all kinds of Free Calendars for small business owners that tell you exactly when to pay your taxes and other helpful facts. Hang one on your wall if you're forgetful.
Anything to add? Any Questions? Let me know in the comments!
