Has the taxpayer made a profit in similar activities in the past?.Does the taxpayer or his/her advisors have the knowledge needed to carry on the activity as a successful business?.Has the taxpayer changed methods of operation to improve profitability?.If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?.Does the taxpayer depend on income from the activity?.Does the time and effort put into the activity indicate an intention to make a profit?.Some basic factors the IRS considers to differentiate between a hobby and a business are: In addition to cases where you’ve made a profit selling a used item, the IRS may also consider your eBay sales to be taxable income if there are regular, recurring transactions like a business.Īlthough you need to report all profits and/or income from a hobby as well as a business, you’ll first need to determine whether you can report your sales as a hobby or a business, so that you can claim the appropriate deductions, losses, etc. So for example, if you bought an antique chair for $100 and sold it for $150, you have a gain of $50 to report. However, if you sell the items for more than the original price, you’ll need to report that gain on Schedule D: Capital Gains and Losses, and attach it to your Form 1040. Remember you can also add shipping and packing fees to the cost of the item. If you don’t have the receipt showing how much you spent on your inventory, you can use the fair market value to price your items. To show the IRS you did not make a profit on your sales of used goods, it’s always advisable to keep receipts of the original purchase. The IRS states that “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.”
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These amounts are not considered taxable income, since you didn’t make any profit. Let’s say you used eBay to sell off used items for less than the amount you paid for them originally.