Garage Sales Might Be Capital Gains
According to Forbes, on average there are 165,000 yard sales in the United States each week. The IRS would classify any garage sales profits as capital gains. According to our Fusion CPA Atlanta tax specialists, capital gains are the profit over the cost basis for the sale of property. Items sold at a garage sale might have been purchased or gifted. If you make a profit over the cost basis, then you owe the IRS money. The garage sale income tax rule would require a tax filer to report any capital gain on your Federal Form 1040 with Schedule D. Why don't most people file the Schedule D? Most people figure that the amount they receive is less than the original purchase price (cost basis).
Proving Your Cost Basis
For those who sell on eBay, they must be able to prove that their cost basis was above the selling price. For example, a lady sold items on eBay, however, she could not prove that she sold items below cost. Therefore, the IRS assessed taxes based on her sales proceeds. But, most yard sales involve a very low selling price. Does that mean that you can claim a capital loss? Unfortunately, the IRS does not allow you to claim a capital loss on your 30-year old sweater, lava lamp or child's first bicycle. The problem is that there is less of a market for your personal belongings, so you are stuck with what you get.
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