5 ms·

Why are you paying income tax on a garage sale? If you're selling used goods it's extremely unlikely that you're making a profit...

jedberg 6y ago
Technically you've already depreciated the assets to $0, so any money you make is profit, minus the cost of marketing the garage sale. But I doubt most people claim their garage sale income.
- ivalm 6y ago
  If you didn’t claim depreciation previously then why is it depreciated?
  - jedberg 6y ago
    The IRS says that the item depreciates whether you claim it or not. It is in your best interest to claim it, because when you sell the item, they assume the depreciated value. This comes up when you own rental houses. If you sell the house later, they reduce the base price by the assumed depreciation of the structure, whether you took the deduction or not.
    - sokoloff 6y ago
      Tax code deducts from your basis in an item the "depreciation allowed or allowable". For personal property [such as typically sold in a garage sale], there is no depreciation allowed or allowable, so your basis in the good is whatever you paid for it.
    - nrmitchi 6y ago
      > This comes up when you own rental houses. Yes, this is true, but there is a massive difference between a real estate investment, and a garage sale.
  - IncRnd 6y ago
    Time depreciates.
- jandrese 6y ago
  Unless you are selling a boat or a car at a garage sale you probably can't calculate depreciation. Typically only capital items can depreciate.
  - jedberg 6y ago
    The IRS has a publication for that! https://www.irs.gov/pub/irs-pdf/p946.pdf https://www.irs.gov/pub/irs-pdf/p946.pdf You can pretty much depreciate any physical object that wears out over time.
    - jandrese 6y ago
      I want to see the guy who lists his Bic pens that he lets customers use to sign contracts. Yes, it has a limited lifetime. Yes it will last over a year. Yes you'll be audited if you claim depreciation on them.
      - jedberg 6y ago
        You would probably just do a Section 179 on the entire bag in the year you purchased it, which would be totally legit.
    - voxic11 6y ago
      Only ones that you use for business or income. Personal property used for non-buisness or income producing activities is not depreciable. > To be depreciable, the property must meet all the fol-lowing requirements... It must be used in your business or income-producing activity
      - jedberg 6y ago
        If you're selling at a garage sale it just became part of your income producing activity.
        pdonis 6y ago
        Even if you take this viewpoint, it still means you can't depreciate the item, because it wasn't part of your income producing activity until just that moment, which means the depreciation is zero, since depreciation can only be taken based on the time the item was used for your income producing activity.
- suresk 6y ago
  This is not my understanding of how the tax code works. If the garage sale is not part of a business and you are selling an item you used for less than you paid for it, you generally have no reportable income. Everything I could find online seems to agree, [1] for example. Do you have any sources? 1. https://www.findlaw.com/tax/federal-taxes/do-you-need-to-report-your-online-sales-to-the-irs.html https://www.findlaw.com/tax/federal-taxes/do-you-need-to-rep...
  - jedberg 6y ago
    The link you posted explains the difference between business income and hobby income. It just depends on how often you have a garage sale. Like everything with the IRS, it's complicated, and also they usually don't care with small amounts anyway.
  - SilasX 6y ago
    Agreed. I think the parent is confusing it with the case where you buy an item for your business, depreciate it to zero (thus deducting its full value as an expense), and then later find out you can salvage some value on resale. In that case, you would have reportable/taxable income from that resale, which you can think of as “correcting the overdeduction for depreciation.”
- cperciva 6y ago
  Ok, maybe the US tax system is very different from the Canadian tax system, but I've never heard of someone claiming depreciation on personal use of children's toys.
- iams 6y ago
  why would you depreciate the assets to $0 when there's very good evidence that the assets do in fact have positive value?
  - slim 6y ago
    in many countries assets value depreciate at a regualtory predefined annual rate till it reaches 0.
    - iams 6y ago
      Coming from a country where that's not how it works it sounds quite strange. Does it apply to houses? Gold? Antiques?
jandrese 6y ago
Because you don't want to go to jail for tax evasion? You don't pay tax on the profit, you pay tax on the sale. My state also requires that you report everything you bought online from out of state so they can charge sales tax on it. Luckily Amazon has a distribution center in my state that charges sales tax so this is a much shorter list than it used to be.
- gwbas1c 6y ago
  No one goes to jail for underreporting a small amount of income, like a weekend garage sale. When the IRS figures out that you underreported something, they assume it's a minor mistake and send you a bill for the difference, plus minor interests. And, as far as out-of-state sales tax... Who actually keeps a list around of all the trinkets that they bought out of state so they can pay the extra $10 of tax at the end of the year? There is a reason why big-box stores are located immediately on the tax-free side of a state line.
  - mattm 6y ago
    > No one goes to jail for underreporting a small amount of income, like a weekend garage sale. Almost no one goes to jail for tax-related issues, period. Only about 600 people are convicted of tax fraud per year and they usually do so because of amounts of more than $100,000.[1] If the IRS finds discrepancies, they'll work with the taxpayer to pay the appropriate penalties. You have to be doing something particularly egregious to end up going to prison. The IRS is not the big, bad bully that it is usually portrayed as. [1] https://www.ussc.gov/sites/default/files/pdf/research-and-publications/quick-facts/Tax_Fraud_FY17.pdf https://www.ussc.gov/sites/default/files/pdf/research-and-pu...
    - gwbas1c 6y ago
      It's because taxes are so darn confusing, that it's assumed honest mistakes are just that. Why are taxes confusing? To keep Turbotax in business!
    - ad404b8a372f2b9 6y ago
Naga 6y ago
In Canada, when you sell the type of things you usually sell at a garage sale, it triggers the "personal use property" rules. It essentially removes any profit from items as long as they are under $1000, so you're safe selling stuff at a garage sale without tax implications.
- cperciva 6y ago
  BTW that's true of income tax but not necessarily true of sales tax. Rules vary across the country but I've read about people getting in trouble for not remitting provincial sales taxes on garage sales. (There's no GST/HST issues since (a) "used goods" are generally exempt, and (b) almost everyone running a garage sale falls under the "small supplier" rules < $30k/year.)

jedberg 6y ago

Technically you've already depreciated the assets to $0, so any money you make is profit, minus the cost of marketing the garage sale. But I doubt most people claim their garage sale income.

ivalm 6y ago
If you didn’t claim depreciation previously then why is it depreciated?
- jedberg 6y ago
  The IRS says that the item depreciates whether you claim it or not. It is in your best interest to claim it, because when you sell the item, they assume the depreciated value. This comes up when you own rental houses. If you sell the house later, they reduce the base price by the assumed depreciation of the structure, whether you took the deduction or not.
  - sokoloff 6y ago
    Tax code deducts from your basis in an item the "depreciation allowed or allowable". For personal property [such as typically sold in a garage sale], there is no depreciation allowed or allowable, so your basis in the good is whatever you paid for it.
  - nrmitchi 6y ago
    > This comes up when you own rental houses. Yes, this is true, but there is a massive difference between a real estate investment, and a garage sale.
- IncRnd 6y ago
  Time depreciates.
jandrese 6y ago
Unless you are selling a boat or a car at a garage sale you probably can't calculate depreciation. Typically only capital items can depreciate.
- jedberg 6y ago
  The IRS has a publication for that! https://www.irs.gov/pub/irs-pdf/p946.pdf https://www.irs.gov/pub/irs-pdf/p946.pdf You can pretty much depreciate any physical object that wears out over time.
  - jandrese 6y ago
    I want to see the guy who lists his Bic pens that he lets customers use to sign contracts. Yes, it has a limited lifetime. Yes it will last over a year. Yes you'll be audited if you claim depreciation on them.
    - jedberg 6y ago
      You would probably just do a Section 179 on the entire bag in the year you purchased it, which would be totally legit.
  - voxic11 6y ago
    Only ones that you use for business or income. Personal property used for non-buisness or income producing activities is not depreciable. > To be depreciable, the property must meet all the fol-lowing requirements... It must be used in your business or income-producing activity
    - jedberg 6y ago
      If you're selling at a garage sale it just became part of your income producing activity.
      - pdonis 6y ago
        Even if you take this viewpoint, it still means you can't depreciate the item, because it wasn't part of your income producing activity until just that moment, which means the depreciation is zero, since depreciation can only be taken based on the time the item was used for your income producing activity.
suresk 6y ago
This is not my understanding of how the tax code works. If the garage sale is not part of a business and you are selling an item you used for less than you paid for it, you generally have no reportable income. Everything I could find online seems to agree, [1] for example. Do you have any sources? 1. https://www.findlaw.com/tax/federal-taxes/do-you-need-to-report-your-online-sales-to-the-irs.html https://www.findlaw.com/tax/federal-taxes/do-you-need-to-rep...
- jedberg 6y ago
  The link you posted explains the difference between business income and hobby income. It just depends on how often you have a garage sale. Like everything with the IRS, it's complicated, and also they usually don't care with small amounts anyway.
- SilasX 6y ago
  Agreed. I think the parent is confusing it with the case where you buy an item for your business, depreciate it to zero (thus deducting its full value as an expense), and then later find out you can salvage some value on resale. In that case, you would have reportable/taxable income from that resale, which you can think of as “correcting the overdeduction for depreciation.”
cperciva 6y ago
Ok, maybe the US tax system is very different from the Canadian tax system, but I've never heard of someone claiming depreciation on personal use of children's toys.
iams 6y ago
why would you depreciate the assets to $0 when there's very good evidence that the assets do in fact have positive value?
- slim 6y ago
  in many countries assets value depreciate at a regualtory predefined annual rate till it reaches 0.
  - iams 6y ago
    Coming from a country where that's not how it works it sounds quite strange. Does it apply to houses? Gold? Antiques?

jandrese 6y ago

Because you don't want to go to jail for tax evasion? You don't pay tax on the profit, you pay tax on the sale. My state also requires that you report everything you bought online from out of state so they can charge sales tax on it. Luckily Amazon has a distribution center in my state that charges sales tax so this is a much shorter list than it used to be.

gwbas1c 6y ago
No one goes to jail for underreporting a small amount of income, like a weekend garage sale. When the IRS figures out that you underreported something, they assume it's a minor mistake and send you a bill for the difference, plus minor interests. And, as far as out-of-state sales tax... Who actually keeps a list around of all the trinkets that they bought out of state so they can pay the extra $10 of tax at the end of the year? There is a reason why big-box stores are located immediately on the tax-free side of a state line.
- mattm 6y ago
  > No one goes to jail for underreporting a small amount of income, like a weekend garage sale. Almost no one goes to jail for tax-related issues, period. Only about 600 people are convicted of tax fraud per year and they usually do so because of amounts of more than $100,000.[1] If the IRS finds discrepancies, they'll work with the taxpayer to pay the appropriate penalties. You have to be doing something particularly egregious to end up going to prison. The IRS is not the big, bad bully that it is usually portrayed as. [1] https://www.ussc.gov/sites/default/files/pdf/research-and-publications/quick-facts/Tax_Fraud_FY17.pdf https://www.ussc.gov/sites/default/files/pdf/research-and-pu...
  - gwbas1c 6y ago
    It's because taxes are so darn confusing, that it's assumed honest mistakes are just that. Why are taxes confusing? To keep Turbotax in business!
  - ad404b8a372f2b9 6y ago

Naga 6y ago

In Canada, when you sell the type of things you usually sell at a garage sale, it triggers the "personal use property" rules. It essentially removes any profit from items as long as they are under $1000, so you're safe selling stuff at a garage sale without tax implications.

cperciva 6y ago
BTW that's true of income tax but not necessarily true of sales tax. Rules vary across the country but I've read about people getting in trouble for not remitting provincial sales taxes on garage sales. (There's no GST/HST issues since (a) "used goods" are generally exempt, and (b) almost everyone running a garage sale falls under the "small supplier" rules < $30k/year.)