Does the IRS Get a Share?
Author: Jenny Shilling
"Bees’ll buzz. Kids’ll blow dandelion fuzz. And I’ll be getting the yard sale set up. In summer..." Thanks Olaf. Instead of lazing about with a drink in hand, I'll be hauling out all of the things that have collected in the garage/barn over the years, making advertisement signs, and deciding on prices, for a long weekend of sales. Just like thousands of other families across America. Yard sales can be simply a way to clear out your garage, a hobby, or a business for some people.
| Garage Sale Statistics | |
| Average number of garage sales each week in the US | 165,000 |
| Average number of people who purchase something at a garage sale each week | 690,000 |
| Average number of garage sales listed on Craigslist each week | 95,000 |
| Average number of items sold at garage sales each week | 4,967,500 |
| Total US weekly revenue from garage sales | $4,222,375 |
| Best time to start a garage sale | 7:00 am |
| Best day to hold a garage sale | Saturday |
Now, when you look at a yard sale, the merchandise that you are selling for the most part are items that you own for personal use: furniture, clothing, kitchen goods, music, books, etc. When you sell these they are generally taxable as capital gains. Capital gain is the difference between the selling price and the basis (usually, the purchase price). If you do hit the yard sale jackpot and make money on the sale of your personal items or items held for investment (like a coin collection or collector’s item), you would report the gain on your federal form 1040 at Schedule D.
Now going back to the garage sale statistics. The overall average price of goods sold at a yard sales is $0.85. Not quite the gain you were hoping for. But does that qualify as a loss? Not for federal income tax purposes. If you try having a virtual yard sale online, the same rules apply: if you have a gain, you report it and if you have a loss, you end up with what someone is willing to pay.
Things can be a little more complex when you make yard sales more than an occasional occurence or hobby. You can become a yard sale hobbyist if you engage in activities for fun, and not for profit. That doesn’t mean that you can’t make money, because you can, but the IRS wants to know that profit isn’t your primary motive.
If your sales happen more and more often, the IRS may determine that you’re running a business. This can be true even if you don’t feel like you’re running a business and even if you don’t make any money. If your activities rise to the level of a business, you would report your sales and expenses on your federal form 1040 on a Schedule C. The plus side of filing the Schedule C? If you qualify as a business and you lose money on your venture, you can claim the loss.
When it gets to that point - you've entered the world of Storage Wars, and we don't want to go there. It's much safer to simply empty your own storage facilities, make a little money on the side, and have the rest of the summer to enjoy. And rest assured, your children will soon outgrow another set of clothes in another month and you storage will replenish itself. And now you have time to browse other people's yard sales.
Should you have any questions regarding taxes, capital gains, or if your yard sales fall into the hobby or business category, please contact the specialists at The Tax Office, Inc. Helping grow your business, hobby, or special interest is our speciality.
