A flea market or a yard sale is a smart way to clear out all possessions and make a little money on the side. Earning a large amount of money from a yard sale could generate some tax liability depending on the type of possessions you sell and the original purchase prices for items sold.
Taxable Income Rules
The IRS may consider income from a garage sale as taxable income depending on the sale price of your goods. According to the IRS, if you sell your personal possessions at a yard sale or flea market for less than the original purchase price, the the federal government requires no tax payment. Your participation in a yard sale or flea market should be sparse and not a regular component of your income earning over the year. Regular participation in a flea market may require you to claim profits as business income on your federal taxes.
Selling at a Profit
Selling your possessions at a flea market or yard sale for more than you paid for them usually requires you to claim the profits as business income. This usually occurs with possessions known to appreciate in value, including collectibles, sports memorabilia or artwork. According to the IRS, you must claim profits of $400 or more from the sale of appreciated assets as taxable income on your federal return using IRS Form 1040 Schedule C. Failure to disclose this income could cost you additional tax penalties in addition to an IRS audit.
Video of the Day
Capital Gains Taxes
Selling a capital asset, including home furnishings and real property, usually requires you to file capital gains or capital losses with the IRS. A capital gain is the difference in the original purchase price of a capital asset compared to the price at which you sell the capital asset. You must report all capital gains to the IRS regardless of the amount. For example, if you sell an antique chair at a flea market for $500 and you only paid $100, you must report the $400 difference as a capital gain. You may only report capital losses for the sale of investment properties.
Online Flea Markets
The same tax rules for real world flea markets and yard sales apply to online auctions and garage sales. Occasional use of online yard sales or flea markets doesn't usually require you to report income from these sites as taxes on your federal return. Establishing an online trade business or used goods store requires you to pay taxes as a business owner. You can make estimated quarterly tax payments to the IRS as a means of reducing your tax liability. Failing to make estimated payments could result in a financial penalty if you end up owing money at the end of the year.