This year and going forth the US law has changed on what gets reported by companies like eBay and Reverb who handle the payment for a sale. This also applies to services like Venmo and PayPal.
I won’t go into detail in this post, because frankly i don’t know that much detail. I will say that largely you only owe taxes on profit, the same as in the past. It’s the reporting, the 1099, that has changed.
I am starting this thread to give this topic a home, and get it on-topic.
Here’s an article from CNBC that seems a pretty easily read yet a somewhat complete summation.
No matter where you sell it, if you use PayPal, Venmo or other 3rd-party transaction vendors, you’ll be filling out some tax forms if you take in more than $600 cumulative in a given year.
I don’t know this for sure but think that to a large extent the IRS will largely ignore smaller dollar transactions. There is no money in pursuing any of that.
But people making a living, making larger profits are probably more the target. If you net $20,000 on electronic gear in a year, well then you’re going to be on the hook.
I do agree it is a pain to go through the detail to report profit on sales though.
ADDED : By “net” i mean make $20,000 profit. You might have to sell $80,000 of stuff or more to do that.
I know almost nothing about cryptocurrency. I feel like that is the opposite of their general philosophy though. Great question. I might consider using that has an alt payment method if it isn’t included. I don’t really want to force people to deal in cash but I’m not paying taxes on something I already paid taxes on. And if that slows down my gear buying so be it (would be a good thing anyway).
You only owe on the profit. If you buy a synth for $4000 and sell it for $5000 you only owe tax on the profit, the $1000. You can even deduct expenses from the thousand. So you don’t pay tax twice, at least from that sense.
Ah. Ok. I should learn to read things carefully before commenting. I would probably never owe then as I almost exclusively buy new gear these days. But that still seems like some bullspit to me.
until they found a way to track all Bitcoins (which is in theory not a problem at all …unless you mined them yourself or traded them for cash … or drugs or whatever people do to obtain them) and you have to explain for every transaction where the money came from when in doubt.
Curious how some of this would work. If you bought some vintage '70s or '80s synth in the '90s and sold in now, is it an honour system to report how much you bought it for in order to calculate the profit? Would you take inflation into count?
Very good questions. I think they’re in the realm of asking your tax accountant. ( Anybody here do taxes ? ) But again this would have to be a lot of money before it matters to the IRS.
In general, the correct answer is “check with a local tax accountant.” Some things to keep in mind:
Look for accountants working out of home offices or converted homes. Avoid accountants in glass towers, they are expensive
A good tax accountant will save you money and stress compared to DIY. If your accountant costs more than they save you, then it may be time to look for a less expensive accountant.
Accountants are slammed during tax season, so start shopping now
In the USA, taxes are assessed at the Federal level, often at the State level, sometimes at the County level and sometimes at the City/Town level. A local accountant will be able to untangle your obligations. A big city lawyer is usually less than useless unless you live in that big city yourself.
At the Federal level, you usually get a lower capital gains rate if you own the thing in question for a year or more. Some states also have a concept of long term capital gains. California does not. (the argument in favor of a lower LTCG rate is that capital gains imply economic productivity, and should be rewarded or at least penalized less)
I’m not a tax accountant, tax lawyer, or anything else like that, but I’ve worked with accountants and lawyers on personal and corporate transactions.
not sure how the IRS is gonna determine what is profit unless you own up to it.
they’re only looking at what you sold. are they gonna ask for a receipt of what you paid for it?
for all they know, if i sold that 132k$ cs-80, i could have paid 280k for it. i sold at a loss.
(yeah i know …for 123k they’ll probably expect you have a purchase receipt. principle is the same. i sell 10 60$ cables that i bought off craigslist for 80$ each)
(the argument in favor of a lower LTCG rate is that capital gains imply economic productivity, and should be rewarded or at least penalized less)