An online business comes with many tax breaks, but it also comes with some tax responsibilities.
Online Garage Sales
If your online auction sales are the Internet equivalent of an occasional garage or yard sale, you generally do not have to report the sales. In a garage sale, you generally sell household items you purchased over the years and used personally. If you paid more for the items than you sell them for, the sales are not reportable. Losses on personal use property are not deductible, either. However, see Sales of Appreciated Assets at an Online Auction for gain reporting.
Home-Based Online Auction Seller Businesses
If your online garage sale develops into a business and/or you have recurring sales and are purchasing items for resale with the intention of making a profit; you may have started an online auction business.
Online Auction Sales Trade or Business
If you are operating a viable online auction seller business you may be entitled to deduct business expenses. Do you have an established business and you are augmenting your sales with online auction sales? Then, remember to include the online auction sales in your business income. View an IRS video on Business Income or read a transcript of the video.
Sales of Appreciated Assets at an Online Auction
Examples of appreciated assets often include art, antiques and collectibles. If you have online auction sales of property where the sales price is more than your cost or other basis, you usually will have a reportable gain. These gains may be business income or capital gains.
Sales of Depreciated Business Assets
If you sell business assets or close your business you may have capital gains, ordinary gains and depreciation recapture to report. An example is the sale of an automobile used for business.
For tax information if you sell or close your online business view the IRS video entitled Closing a Business or read the transcript online.
Don’t Be A VICTIM OF A TAX SCHEME!
Some promoters are targeting home-based businesses including online auction sellers for abusive tax schemes.
References/Related Topics
Online Auction Sellers
Publication 587, Business Use of Your Home
Publication 463, Travel, Entertainment, Gift, & Car Expenses
Publication 334, Tax Guide for Small Business
Publication 17, Your Federal Income Tax for Individuals
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