Saturdays are usually quiet on our block. But not today.
At 7 a.m. cars will be cruising every street in our suburban community. It's our neighborhood's annual garage sale.
The deal, according to our homeowner association rules, is that we can put out all our personal stuff on public display and hope for an occasional sale just one day a year. Today is that day.
The hubby and I have never had a garage or tag or yard or whatever you want to call it sale. Neither do we visit them.
I know some people swear they can get bargains at the sales, but they've just never appealed to me.
Part of it is that I don't like the haggling factor that seems to be a big part of such events. Even at antique shops, which we do frequent, I don't negotiate. If I want something and it's price is reasonable, I'll buy it. If it's overpriced, then I just move along.
But some folks absolutely love these sales. Like The Yard Sale Queen, who blogs about life as a yard and garage sale, thrift store, bargain hunting addict. She also offers tips on how to be a savvy yard sale shopper, as well as what not to buy.
Taxes on your sales: One question that always comes up in connection with garage sales is, "Do I owe income tax on what I get for items I sold?"
While it seems that the IRS wants a piece of just about every penny that comes our way (per IRS Publication 525), garage sale income usually escapes the tax collector's clutches.
While the IRS says "if you sold an item you owned for personal use, such as a car, refrigerator, furniture, stereo, jewelry, or silverware, your gain is taxable as a capital gain." The key phrase here is "capital gain," and that's underscored by the example the IRS offers:
You sold a painting on an online auction website for $100. You bought the painting for $20 at a garage sale years ago. Report your $80 gain as a capital gain on Schedule D (Form 1040).
But most items sold at garage sales and the like don't bring in more than what you paid for them. In fact, in most cases your total take for all yard sale offerings will be far less than what you originally paid.
So, says Kerry M. Kerstetter, CPA and the Internet's Tax Guru, when you sell the items for less than you paid for them, the sales don’t have to be reported on your tax return.
Tracy Coenen, a CPA who blogs at Wallet Pop, concurs: If you sold a handful of personal items at a garage sale (or via eBay or another online auction site) you don't have to report this income on your taxes. So long as this is something you're not doing on a regular basis, you're in the clear.
Garage sale/auction businesses: But tax things change if you make a living from, or appear to be doing so, via regular garage/yard sales or online auctions of your old stuff.
In these cases, the IRS will consider your sales as more than a weekend purging of overstuffed closets. The agency's examiners will likely decide that you're running a business.
And if you make any money from that business, it's reportable and taxable income.
In fact, according to this New York Times story from February, the IRS is now focusing on enforcing the rules for high-volume sellers, although it makes an exception for people who occasionally sell personal items of limited value. Details on what the IRS is looking for can be found in this fact sheet, Reporting Auction Income and the Tax Gap.
Of course, in these cases where your regular sales are actually a business enterprise, you can reduce that income by claiming legitimate associated expenses. But you need to be aware of the tax implications to make sure you don't invite unwanted IRS attention.
Give it away instead: If you're looking to get rid of some items you no longer need or want and get a tax break, too, consider donating instead of selling them.
Admit it. You have much better things to do than spend a beautiful weekend holding a garage sale. Plus there's all that time beforehand cleaning up the items and deciding on the prices.
And when all is said and done, there's no guarantee you'll get a worthwhile amount for the items.
So why not just take all that stuff to your local Goodwill, Salvation Army, church or other IRS-approved charity. If you've got large items, such as appliances, some groups will even pick them up.
Most charities accept a wide variety of donations, such as clothing, furniture, electronics and household items. Just make sure the items are in good or better condition to meet new IRS contribution rules. And be sure to get a receipt.
In addition to helping you get rid of stuff you no longer want, you'll get a tax deduction (if you itemize) and, more importantly, you'll be helping someone else.