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Will I have to pay taxes on eBay sales?

q07u3stion1

I sell my previous used and new clothing items I never wore on eBay - However the amount I sell for is always much lower than the original price the item was bought for (still has tag showing original price but do not have original sales receipt) - Will I still have to pay taxes on the sales from eBay or is there a way to show the IRS I actually lost money by selling the clothing items cheaper than the price I bought for? I file my own taxes so I would like to know what to submit to see if I still have to pay taxes - This year may be under 1k total but next year may be about 2k or 3k as I have a large closet that I will be listing to downsize

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ptaxes

Hi!

Great question! If you made more than $600 through eBay, you will have to report this income. However, when you report this income, you can enter the expenses from your business in a Schedule C. The software will then calculate the loss and contribute that towards your taxable income. This way, you will be reporting a business loss which will not increase your taxable amount.

To enter a Schedule C in the software, you will navigate to the 'Income' tab > 'Business Income (Schedule C)'. Here you will enter your income and expenses for your self-employment income from eBay.

q07u3stion1

Is the above true even if technically it’s not a business and I am just selling unworn clothes? Thank you!!

q07u3stion1

Thank you! Just to clarify, is the above recommendation true even if this is not a business and I am just personally selling unworn clothes I don’t need/want anymore? Just want to make sure I fully understand since it is not a business just a one time purge of closet : )

q07u3stion1

https://community.freetaxusa.com/discussion/comment/3320#Comment_3320

https://community.freetaxusa.com/discussion/comment/3313#Comment_3313

also is the original price of the item listed as en expense? Do I need to submit documentation?

ptaxes

Yes, Schedule C considers a business as any activity that is for the purpose of income that you engage in regularly. In this case, your hobby of selling clothes through eBay would be reported through a Schedule C. While you may not consider it a 'business', for the purpose of the tax forms, you would enter the income through this schedule.

q07u3stion1

https://community.freetaxusa.com/discussion/comment/3330#Comment_3330

Thank you!! This is very helpful - Last question - Do I enter the original price of an item as an expense to help calculate the loss?

Do I need documentation such as pictures of the price tag? I do not have the original sales receipts

what if item was worn and I don’t know original price bought at?

ptaxes

Happy to help!

You can list all of your expenses in the software on our "What expenses did you have?" screen under 'Schedule C'.

Here, you will put your costs for clothes in the category you believe most classifies your expense. When you enter your income, the system will calculate the loss/gain - and if you have a loss, as you mentioned, it will be reflected in your Schedule C.

In terms of documentation, you will not need to submit proof of expenses with your return. However, it is recommended that you keep all documentation you have in the case of an audit.