Paying Taxes On Garage Sales – Navigating the Legalities

From getting rid of clutter to socializing with your community, we all love to hold and attend a good garage sale! There is another aspect to the sale, though: money. If we were strictly against receiving any money for our old stuff, we might call them garage donations—but we certainly don’t! Of course, nobody is upset about making a quick buck or two in exchange for letting go of things we don’t use anymore, but there is one uncomfortable topic to navigate whenever money comes up. Taxes.

Taxes 101 tells us that you technically have to report any sort of income you have throughout the year, but as we’re all well aware, things aren’t always that straightforward, especially when it comes to taxes. So, do you have to pay taxes on your garage sale income? Are you a federal criminal for not doing so thus far? Is living on the edge just another benefit of the almighty garage sale?

The simple answer

No—most people don’t have to pay taxes on their garage sale income. The loophole here is that most people sell their garage sale items at a lower price than what they originally paid. This means that there is a personal loss rather than a capital gain. In other words, if you bought a pair of headphones for $200 years ago and sold them for $50 last Sunday, you didn’t actually make $50, you lost (a non-deductible) $150—as far as the IRS is concerned. As long as your garage sales operate in this way, selling items for less than you originally paid, you probably don’t owe anybody anything.

The more complicated answer

Most people are only going to have occasional garage sales and sell their items at a relative loss—if this doesn’t sound like you, though, there might be some nuance to consider.

The first point is to consider actual capital gains. If you have an item that has appreciated in value, a garage sale is probably not the place to let go of it anyway, but that profit would need to be declared! Gifts are another sneaky item that might fall into this picture. If you’re selling some old golf clubs that your brother gifted you some time ago, you technically didn’t pay anything for those clubs, so any amount you sell them for will likely be a capital gain.

Also, if you make a habit of repairing or refurbishing items in order to sell them again, this might be considered a hobby or a business. If you only sell items occasionally, and also don’t do so with the intent to profit, you might be considered a hobbyist. Here, you might actually be able to deduct some of your expenses. If you sell more often and with the intent of profit, then you might be considered a business. Here, you will have to declare the profit, but business tax benefits can help you declare a net loss.

If you’re in these more technical waters, and especially if you’re bringing in quite a bit of cash, it’s important to talk to a tax professional to iron out the details. Here at Yard Sale Search, we’re a (self-proclaimed) authority on all things Yard Sale, but the intricacies of taxes are a little bit outside our forte! Living on the edge or not, long live the yard sale!