How to deduct PERSONAL ITEMS in your reselling business
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- Опубліковано 21 лип 2024
- Most resellers get their start by selling their own personal items online. Are you allowed to deduct those items? And if so, how much is the deduction for your personal stuff? Watch and find out!
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Thank you so much !!! Wonderful information!
Thanks for the information. You hit all my questions.
Thank you for this thorough explanation. Exactly what I needed!
Thank you! So helpful!
Great video! Thank you so much for all the information you put out for resellers 👏👏👏
Thank you. This is great information and is exactly what I needed to know. I just found out about you and subscribed.
Thank you for this fantastic information. You have answered my questions. You are a big help. Thanks!
Thank you so much for this video. You have given me a better understanding of estimating my COGS on personal items converted to business inventory.
Great video. This is very helpful. I can use this same concept with buying and selling tickets.
Thanks so much for this video! Just what I needed. I'm trying to sell items I've collected over the past 30 years and this helps me figure out how to treat cogs for them. My general feeling is that most have lost value but at this point its all cash flow.
The fmv could be the list GW offers with values to deduct when donating, (higher than gs values) & if nothing else it would be consistent. Great video with info that many needed more confirmation on, Good job!
This is the answer I have been looking for, I am starting a reseller business but I have a sizeable personal collection that I want to sell as the first initial inventory of the business.
This information was so helpful.
Great info, as all your vids. Thanks so much
Very helpful thank you!!
Thank you for making this
Another awesome video! 👏
Extremely helpful thank you
Thank you very much for video and special BIG THANKS for so good pronunciation!!!! So easy listen you and understand what you are talking about. Especially for people with English as second language. Happy New Year! 🍾🥂🎄⛄
Much appreciated! 🙏🙏🙏
Thank you for the great video! Question if I file as an individual can I still take cogs deductions or do I need to setup and file as a business?
Great video. The biggest "glitch" I see in all of this is that your personal items are unique to you and your prior use of them is not like anyone else's of a similar item. Example. I sell a personally owned camera that I purchased 20 years ago. I may have taken better care of it than similar cameras being sold. What I sold it for can't be compared to another's sale of a similar camera. Mine is in mint condition and I've serviced it. My works perfectly (IMO). The other cameras may have hidden flaws or obvious damage so they'll have a different value to the buyer and seller. There's really nothing to compare it within the online marketplace so it's unique to me. If you sell a shirt that's been washed 50 times and someone else sells that same exact shirt but it's only been worn once and never washed there's no comparison between the two. The rule change will turn into a real cluster phuck at tax time. It will come back to hurt honest resellers while the sneaky sellers will skirt the system.
It maybe just better to have yard sale at give away prices or just give it away than be aggravated. Sounds too complicated. Even ebay say on their site ……We are lobbying Congress on your behalf to raise the $600 threshold. It’s a threshold that ignores the fact that income from selling used goods, usually sold at a price below the original price, is rarely taxable.
I agree. I shouldn’t have to do accounting homework to sell our used stuff. It steals my time and $ in more ways than one. It isn’t worth it, at least not to me.
Thank you soooo soooo much!
Thanks for the video! I appreciate it and the wealth of info you give in these...I am looking to deduct some of my student loans from my business this year in 2022- I know with the Cares Act an employer can set aside and pay a certain amount for an employee and it's a business deduction for employer and does not count as income for the employee. I also saw (read) that self employed can also take this deduction...can you chime in on that with your interpretation? I know a lot of us use our reselling $$ to repay student loans...I appreciate your input...and your knowledge and everything it took to acquire that knowledge...hince the student loan debt! lol
You da best, Mark!
Thanks!
Thank you for this helpful video! Quick question - I only sell personal (old/used) clothing on Poshmark and made a total amount that is likely 70% or less of the original value. I do not source items for reselling. I consider it an online garage sale, as all of my items are personally owned and none have appreciated in value. For COGS, do you recommend that I use an estimate of what I believe the original cost of (all) the clothing to be, or instead use the fair market value (which is likely, approximately what I sold it for)? I did not save any receipts for the old clothing purchased many years ago. Considering that I originally paid 70% more for the items sold, I did not profit and the fair market value would be a wash.
Very helpful
Great video, thank you for sharing... I'm terrible at all these. :) Last year someone gave me a full garage with inventory for free, how do I go about that. :)
Thank you so much for this!! Super helpful. Does the Cost of Goods include sales tax? Thanks again!
Yes, it would include any sales tax paid for inventory.
Great videos am new to reselling do you help out with making a spread sheet for keeping track of in an outs
Thank You for all the information I just have a question what if a Shirt was given to you & you no longer wear it; then you sold it…What would the COG be then? Thanks
Mark, did you make any videos on Standard deductions?
Great video. Tuty
Thanks for the great explanation. This has helped me out a lot. I did have a few more questions, though. I have a store on a (music gear site) that I sell my personal musical gear. I purchased all the gear new at retail, but eventually sell it as slightly used for a loss. I received a 1099-K for the income I received for selling this gear. I am trying to figure out the best way to offset this income. Do I write it off as "supplies/office expenses" on my schedule C? Inventory? Also, since it is a new store, will a 'BOY' inventory that isn't "0" be a big red flag since it doesn't match the prior year? Any help would be appreciated. Thanks so much for your video!
Hi! Can you make a video on ssdi and filing jointly?
Great video! I love how you made it so easy to understand all the details. I had a question, for items I buy from the flea market or garage sales, how would I be able to prove what I pay for them since there’s obviously not going to be a receipt? What about items bought in lots? Thanks in advance
You could buy a receipt book from dollar tree. You write a receipt for your expense, date, place and time. Keep that receipt. You can do it for yard sales as well. Items bought in a lot ppl usually divide the total price paid by the number of items purchased.
You just need to document it. I use a monthly planner to document mine. You can use notebook, receipt book, planner, etc
THANK YOU for this video! In the past few weeks I've seen so many casual resellers freaking out on various forums re the $600 trigger for 1099 issuance in 2022. Many have complained they can no longer sell online because they didn't keep the original receipts from items they originally bought for personal use years ago. I've tried telling them that they do not need the original receipt and advised they speak to a CPA. I'll point them to this video.
I've been so hung up on this question for ages.
Thanks for the video yours is the best one yet and closest to the answer I need . What If I have several junk vehicles around that I've had for 10 to 20 years and I sell parts off those on ebay, I consider them my personal stash because I'm just a hoarder and I try to keep plenty of difficult to aquire spare parts for my own projects because it's cheaper than buying even used replacement parts that I might need later in a time of need . How do I come up with a figure that an item off an old car I bought for parts a long time ago cost me? Or could I just look up what the part is bringing on ebay under sold items and establish a fair middle of the road value that way? I mean if I've had it for years and sell it, I sure don't want to pay tax on 100% of the money left over after final value fees and shipping etc . That's being said I usually do remember exactly what I paid for every old junker here. But most have no title and no receipt as it was a cash transaction usually and I just hauled it out of their yard. Keep in mind I'm not the average hoarder. I've got 15 acres of junk cars and equipment, some I've driven or used at times, some I bought a long time ago just for spare parts. So I might have a close to a hundred small 50.00 to 200.00 items the size of a alternator that I sell during the coarse of a year that have been here over half my life. My Dad was a lot like me in this regard.. and I just have a lot of stuff period
What about inherited or gifted items from 15 or more years ago? I have in the past considered COG as zero. Also selling LP's I purchase new from 30 to 50 years ago. I just assumed the remembered average cost of new LPs back then, around $7.50, as COG
Can a charitable organization's donation valuation list (such as goodwill) be used as the cost bases for a personal item that is put up for resale?
Great explanation! What would be an easy cost effective (Free) accounting app or software to start with to show all fees, shipping, loss, profit, etc. ?
Exactly! Ebay is huge company and why it is so hard for them make their own program.
What about items you inherited? What should one put down for COGS? Market value? Thanks for the videos!
For inherited items you typically get what's called a step up in basis. In other words, your cost or tax basis is basically the market value on the date of death.
New subscriber to your YT content, I found you on IG and have really enjoyed the expanded content here. Thank you!
Thank you for this video! I was so confused about this as I am just starting to sell on ebay and only listing personal items. I don't feel so freaked out now by the taxes! Question: What about items you are selling that your received as a gift? Can you deduct anything from them???
wondering the same
How do you account for personal items if you are doing cash accounting (cash in cash out)? Thanks!
Thank for the info. So when I log my personal item in my spreadsheet do I establish/assign a COG at that time or wait for the item to sell and use that amount as my COG for my personal items sold? My personal items are getting me confused on how to properly log the info and account for this at tax time. Also, Inventory EOY, are personal items included in that total?
awsome vids, keep upi the good work...can you do one explaining cryptos gain?
You know us so well🙌 it's so crazy and hard for regular people to understand thank you!!!!
Thank you for the video. I just received your inventory spreadsheet and after watching this video I am still confused as to how (Where) to account for it in my inventory if it started with items I owned previously? Would I enter it as a line item under purchases as if I "bought" it sometime in January and total the COGS ? My question is how to account for it in inventory. Hope that makes sense!
Yes you would account for it as if you purchased it in the current year 👍🏻
Thank you for this information. So I would like to clarify. I've sold about $4000, but only $800 was actually from profit for flipping thrifted items, or consigning my friends items which I keep 50% profit. The rest was what I considered my personal sales this year. I have been recording those with a category specific to "our clothes" and figured that at tax time that I would only file for $800, but then I need to consider the equipment I've purchased, lighting, printers, supplies etc. Pretty much I've probably only profited $200. But what I'm learning from you is that the cost of goods for my personal items really should be taken into consideration every time, even without receipts? I came on to you tube to search how can I prove my personal items were mine and not purchased and flipped for profit, and what you have shared I feel makes sense to answer my question. I couldn't really verify that it was mine without a receipt, but then I should list what was the market value or what I paid for it, the lower of the two. So I would actually reflect that I profited from the majority of my items since I mainly source second hand for our personal items. Is anyone else in a similar boat? I haven't registered as a business yet. Should I now or do I just list as a sole proprietorship without any actual business license?
Have you gained any wisdom in the two months since you initially commented? I’m wondering the same exact things..!
I really need the answer to this question too!
What I can tell you is it was a lot of work and money to properly register as a sole proprietor and register to do business in the city that I live in and to file quarterly sales tax has been most difficult for me to do while managing a household, two children, and going back to work part time. As of September I recognized I need to stop selling online. I may again in the summer time, but I cannot manage it during the school year. I want to reconsider even renewing my license and just know that I tried and I will most likely pick it back up again when I have put more thought into it.
Can any expenses be deducted if you are just doing sporadic reselling as a hobby? I know you still have to report that income, but not sure about the cost of goods sold, shipping expenses, etc. Thank you!
If you have to report it and pay taxes on the income then cost of goods shipping expenses fees and all of that would be a deduction.
Can we deduct personal items costs when they sell if we have decided to start the new year and use the cash method for inventory?
hi Great Video! I do have a question. My CPA told me if you cannot prove what you paid for an item, you cannot deduct ANYTHING in terms of Cost of goods sold. Your video obviously contradicts this opinion. Any further guidance/opinion on this? For context, I sell many comic books and sports cards that I bought 20 - 30 years ago and I have no idea what I paid for them. I had been taking your advice initially by just using a really low value in terms of cost of goods sold, but after hearing the guidance from my CPA I haven't deducted anything unless I can prove what I paid. thank you and keep the great content coming! bruce
If you can't prove it, the IRS could disallow it, but I wouldn't go so far as to say you can't deduct it. I think it just comes down to how conservative or aggressive you want to be. In my view, if you incurred a business expense then it should be deducted on your tax return, even if you lost the receipt.
How do you account for items that are given to you by other people?
This seems difficult with antiques. If I have items from my parents and grand parents. Very difficult to value
Hi There NYDCPA. Great video. I signed up for the course and am looking forward to it if I get an invite. Question for you about what to do with the 25% getting set aside now for taxes. Can I invest it in stocks during the year and then pull out the 'taxes due' to pay the IRS or will I get hit with more taxes on the stock profits?
It all depends on the tax you'll owe and if you are required to make estimated payments throughout the year. Keeping that in mind, you could park it in stocks, and yes if you sold the stocks at a profit, that would trigger some tax too.
@@notyourdadscpa Thank You for the response. I'll find a local CPA here in Dallas and see what I need to do to stay in the good graces of the IRS.
My question is going to be very complicated. As a kid and young adult I bought boxes of football cards and completed sets. I have no idea what I paid for them back in the 70s and 80s, or how many boxes I purchased in order to complete all of the sets. I also had to put them all in boxes and card holders back in the day, so that’s an added expense. If I sell my cards over a couple years, how to I report expenses?
same here
I would be really interested in a video on how to determine whether your online activity would be considered a business or a hobby by the IRS. I am an artist and sell my art online on social media. Since I've always viewed it as a hobby, I've never really kept too much in the way of records, or even really bothered to see if I made any profit or not. It's just something I do for enjoyment. This year, as it has grown in popularity and I am making more sales, I will be keeping careful records so I am ready for 2023, but I'm curious to know: is it a hobby, or is it a business?
Maybe theres a Q and A for questions like that on Google?
I am courious out this
same question.
If you only do it from time to time, with no real expectation of making a lot of money, or just a few "online" garage sales selling, then it's more of a hobby.
If it's something you're doing frequently and with the intent to make money, then it's more a business.
I just posted this question in another video. Thx. Disregard
So what if you bought something in 2021 but it hasn’t sold yet, would you deduct the cost of goods this year or only when it sells? I’m just confused on how to keep track of it all
4:25 I had heard before that you can’t deduct a loss from a personal items?
How is a "personal item" defined? Would collectibles I bought to display in my home be personal items? If I sold a collection on ebay, I could end up with dozens of collectible items sold and look like a business selling collectibles (when I'm not). How does the IRS define what that is, and what's the difference in how a personal item is taxed vs a non personal item?
If you are selling at a profit, it's all taxable, whether it's a personal item, business item, collectible, hobby, etc. But what those differences will drive is how much you can deduct and how it will be taxed. If you're not necessarily in a collectibles business, then those collectibles would be subject to a special collectibles income tax rate and reported on the face of your 1040. As far as the definition I'm not 100% it is black and white.
Can you just zero out everything? Make the COG the sale price?
Hi a love your videos, this year my daughter was laid off she had been collecting anime figures for almost 15 years, then she got pregnant also and she sold about $8k worth of figures most she sold at a loss to try to pay her bills, how does she handle her taxes with the new EBay 1099K requirements?? Would that be as a Hobby? She doesn't run a business? Thanks so very much for any advise on this, sincerely.
I’m selling my comic books on eBay. I have collected through my years. I have no track of receipts. Can I use the original cost of the comic cover price. They all have cover price on the actual comic that comic was sold for
Is whether you use "cost or market" based on each item or all items you're selling..i.e, Do you have to pick one method and stick with it forever?
Hi, I have some questions for you but should I post of all here or is there another place that I can email you? Or Somewhere else to post them? I don’t want to use up a lot of space but please let me know I appreciate it thank you
Hey Mark. Love your videos and all the information you share. You ae a great speaker, everything you say comes across with ease.
I do have a question though. When deducting, is the cost of goods pre-sales tax or post-sales tax?
Question: I rented a storage unit, just to store my inventory, can I deduct it on a schedule C
So can this also be used for goods bought in 2019/2020 with the intention of reselling but you never did? Now of course the receipts are lost in that time, but similar items are still available for purchase. If I sell those items in 2022, can I show what the COG would be today for those items?
Yes, anything that you sold doesn’t matter what you’re intent was.
So I sell hundreds of clothes. I have to actually consider every item at tax time? That’s ridiculous
Thanks so much for this video! Also, should I have a seperate bank account if I'm only selling my own items?? Thanks Again.
Avoid mixing your sales etc. with your personal finances. Open a separate bank account.
@@pxbrixey4319 Just to verify?? Even if just selling your own personal items?
@@carleynash6964 Yes, you need to keep them separate.
My stuff is so old i cant even figure out when i bought it no less how much. Plus people have moved in and out of my house and have left this here and i get stuck with it so i sell it?
What if you are only selling personal items and you reach the $600 amount on ebay? I used to collect WWE cards but don't want them any more. I am selling them below market value because I want to get rib of them and I will never make as much as I spent on them.
I Google questions like that.
@notyourdadscpa Thank you so much for this video, Mark! I have a couple of questions: If you have a reselling business and also have personal items you are selling- if you sell those personal items in the same place as the rest of your reselling business, does that act alone convert them from personal into business inventory? Can you pick and choose which personal items you convert into business inventory? Let's say that gaming console in your example originally sold for $450 and you sell it for $250. If you convert it into the business and the market value at that time is $100 you have $150 profit exposed to taxation (before deductions)
But, if you leave it as a personal item you sold without entering it into your business inventory, your original cost of $450 stands and you have a loss but, not one that can be taken anywhere through the tax process. If you don't care and just want whatever you get from it, can you do it that way? And, if you can do it that way, the total amounts throughout the year of your personal items will show on the 1099 you receive- how do you explain the difference to the IRS with your taxes? Or, are you expected to explain it?
I don't know if there's a definitive answer on this about what officially constitutes an item being business inventory. If you are selling it on your business platform and the funds are going to your business bank account then that all would lean toward it being a business item in my opinion. But on the other hand if you document it as a personal item then I wouldn't be afraid to go that route if you don't want it to be lumped in with your business stuff.
The IRS finally has acknowledged the problem with 1099ks and personal items and addresses it here. Not a simple solution but they do give instructions on how to report it. www.irs.gov/newsroom/form-1099-k-frequently-asked-questions-general
@@notyourdadscpa Thank you!
I did not account for this my first two years of filing taxes, I just excluded the income from personal sales. Should I go back and fix it or just start going it properly going forward
How much is the basic course your going to offer
I need CPA SERVICES Asap. How do I go about choosing a CPA? Do you offer services?
Hello I do have a question my mom gave me a bunch of inventory cleaning out her garage it took a U-Haul to get here and my cost for the U-Haul was $296 it was split between me and my sister-in-law, my sister-in-law did all the U-Haul business I just split the cost. Also I would not know how to deduct that one talking individual items because it's just too much. That was in November of 2021, my brother wants me to pay her 30% I have been putting my cost of goods at zero on those items should I not be? Should the cost of goods be the 30%? thank you
Yes! In that case you could include the shipping cost of acquiring the inventory as part of the cost of goods sold
Let’s say I sold 10k worth of stuff on eBay and transferred the funds to my PayPal everytime I withdrawl money does that mean I have to pay 10k tax worth for eBay and 10k worth of PayPal?! Or does it know I’m just withdrawling the funds thru PayPal, rather then making a sale on paypal? Im so confused.
If I'm consigning items for people are my COG what I have to pay them in the end? 50% of the net profit? I get so confused with taxes and whether to deduct this from my clients as well? Please help . Thank you!
Mark, I'm using your spreadsheet for DIY bookkeeping my new resale business. Q: When adding a personal item I bought several years ago to my Inventory Detail Sheet, what should I put as the item's "date of purchase" in Column D? I ask because if I use the actual purchase date from the old receipt, my very first year of business shows a beginning inventory number on the Inventory Summary sheet . Shouldn't the Beginning Inventory amount be a 0 for my first year of the business? Hope that makes sense. Thanks!
Yes beginning should be zero, so you'll add those items as purchases on the date when you brought them in for business use 👍🏻
@@notyourdadscpa thanks so much!! :)
Still confused. I've sold a bunch of personal stuff. My daughter's plush, toys, etc and random house stuff. A ton of it was gifted to us. Do I really have to research every item? What about the ones we got free?
Did you ever get an answer to this? I’m so overwhelmed 😢
Yeah but where do we enter the cost?
When entering the information into your free inventory spreadsheet, does the PURCHASE DATE matter and if so, could you please explain further. I'm using personal items that were gifted to me as the start of my beginning inventory. This video helped explained how to find the price of these items but didn't make clear about the date. Should I just put the date at the beginning of the year instead of the correct 5 years ago date ?
Correct, the purchase date doesn't matter as much. Put any date with the year of when the item became part of your inventory.
For the example where a personal shirt that cost $20 is converted to business inventory for sale, why would you even consider FMV for COGS for that item, whether or not it was less than the actual cost, when the actual cost is known?
For the shirt bought from Goodwill for $6, are you not comparing its cost to FMV in your example because you’re assuming $6 is below FMV?
When is the LCM rule required?
If we are supposed to always use the LCM rule it would appear we might pay taxes on unrealized gains/profit (e.g. we know the cost and can prove it, but we list FMV for COGS because it’s lower).
I sincerely appreciate any elaboration on the topic!
I sold Pokémon cards that I bough 22 yrs ago. They. Cost me only $5 a pack back then. I sold them for $250 a pack. Does that mean I can only deduct $5 as expense even though the value is way higher today?
How do I do my taxes if I only calculated my bought and sold. so say per month I add all my expenses. inventory. packing stuff etc as one cost each month., then I take my total I made each month (after fees) and put that in another column them I subtract them for my total profit of the month. Is this way not okay to do?
That I how I used to do it. It should still apply today, perhaps someone would correct me if I am wrong. Basically, I did it that way for two decades, the IRS never had a problem with it.
Also how do account for inventory that has not sold at tax time?
Good question. I'd ask Google
If I am using Zero Inventory Cash Basis (where i deduct cost of goods in the year I purchase it) Do I use the date that I "convert" the item from personal to business in order to still be able to deduct the "Market Value" since obviously my original purchase was years prior?
I have the same question! :)
Did you ever find an answer to your question? I’m wondering the exact same thing!
Yes, you would use the lower of the original cost or the market value at the time that you convert it, and also deducted at that time.
This may be a strange situation but what if I am using comp dollars earned from gambling to buy items in their stores to resell. For instance I have a receipt for $325 for a recent item I got but I sold it for $269. Is that a loss I can write off since I have the receipt? Also don't I have to add these items into my inventory because we have to use the accrual method now?
You can take the loss... accrual accounting is mostly for bigger companies
So this will be my first year filing taxes for my ebay sales. Will my fiiing trigger a look back by the IRS? I sell my personal items from 50 years of pack rat behavior. I am petrified. I just retired last year and was hoping this would supplement my SS, but now I feel like just donating it all!
And just the fact that it's the first year you're showing business activity on your tax return will not by itself trigger additional scrutiny of prior tax returns. No need to worry!
Sometimes I order a liquidation pallet and several items are damaged, and I dispose of them. How can I deduct this from COGS using your inventory management spreadsheet?
If you donate old inventory but dnt have receipts for proof of cogs will it be considered personal and you can’t write off?
Great videos! I have an unusual question? I have a friend who buys storage units and donates thousands of dollars of low value items to goodwill. Then gets a receipt and uses those donations as tax right offs to lower his tax burden on his reselling business at the end of the year. I’m curious if this is a legitimate thing to do and also specifically how much those types of deductions would reduce your taxable income. For example if he donates $30,000 in goods in a year how much would that reduce his taxable income? Thanks in advance!
Donated business inventory would typically just be deducted as part of cost of goods sold, it's just as if you had sold those items for $0.
@@notyourdadscpa thank you! Very interesting! what if you don’t categorize those items as business inventory. for example what if you keep $100 of items from the storage unit for personal use then donate them later would you be able to write them off as a charitable donation?
I feel like I’m way in over my head and things seem way more complicated than they should be
If I go to goodwill and purchase 20 items but only 5 of those items sell during the year but my receipt has all 20 items listed, how do you use the receipt to show a business expense if only 5 items qualify?
The other items could take years to see, how do receipts help if they are 4 years old? So confused
Calculate your inventory at beginning and end of year, then beginning inventory + purchases - ending inventory = COGS....you could also just list it all in the year purchased under supplies
I do woodworking and I had to purchase a truck to transport materials. Can I deduct the purchase or only a percentage. I'm in Ohio if that matters
You should be able to depreciate your truck. Your CPA can advise you.
If I buy a box of brand-new football cards for $100 (50 cards per box) and sell 10 of those cards for $5 a piece, do I calculate the COG as 100/50 * 10 = $20?