Taxes on garage sale earnings

For about a year now, I've been taking morning walks in my neighborhood, something you might know if you follow my personal "social network" page, where I post an occasional walk haiku, rather than the ol' blog's Facebook page.

But today was the scariest walk day I've encountered since I fell back in May and broke my wrist. It's our neighborhood's annual fall garage sale.

Neighbors I rarely see are out, hawking their old wares. Getting to touch base with them is good.

But their forays into retail mean there are lots of cars jamming the roads and cul-de-sacs. They block my usual route and make street crossings more of an adventure than I like.

Worse, there's the engine noise and exhaust fumes (these autos passed state emissions tests?!) that ruin my usually peaceful ramble.

Our sleepy suburban atmosphere is further disrupted by barking dogs upset with all the activity, sidewalks jammed with card tables and yammering buyers and sellers haggling over a few bucks.

And neighborhood kids have become curbside barkers: "Garage sale, garage sale! You know you want it! We've got lots of stuff at really good prices!"

My only consolation is that my neighborhood is transformed into a Texas-twanged bazaar just twice a year.

To the tax issues: Thanks for sticking with me while I vented a bit about my personal issues with garage sales. You knew I was going to get to taxes, and now your patience will be rewarded!

When our spring and fall community garage sale days roll around, I always get asked, is what I make at my yard sale items taxable?

And I like being able to give neighbors some good tax news. No, the IRS doesn't get a bit of any money you make on your old, unwanted items.

You're generally selling household items you used personally. More to the tax point, you're selling them for less than you paid for them.

The federal tax laws provide for IRS collection of tax on capital gains. So, notes IRS Publication 525, "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."

But who's ever had a capital gain on an exercise bicycle, old toys or an out-of-style suit sold at a garage sale?

Since you aren't looking to make a killing on the sales, just pocket a little extra cash while cleaning out your closets, Uncle Sam doesn't get a cut of the proceeds.

However, don't try a fast one and use the below-purchase-price sale amount to claim a tax loss unless you really want to talk to an IRS auditor.

Check with your state tax collector: You might, however, want to check with your state and city or county tax collectors. Some jurisdictions might have laws that require local sales tax be collected or that you at least pay a nominal fee for a yard-sale permit.

I am pleased to let my Lone Star State readers know that since my spring report on garage sales, the Texas Comptroller has decided to no longer strictly enforce prior rules that required serial garage-sale holders to acquire a permit and collect sales tax after two garage sales in one year.

Instead, the Texas tax collector now is following the state tax code regulations regarding occasional sales.

Essentially, as long as you're selling personal property on your own (no auctioneer or broker involved) and your total sales are less than $3,000, your garage sale transactions are probably exempt from paying Texas sales tax, regardless of how many weekends you put your stuff out in the driveway.

Again, though, remember to check with your city or county (and homeowners' association) about its garage sale rules.

Photo by Eastlaketimes

Related posts:

• Are garage sale proceeds taxable?
• Taxes on garage sale proceeds
• Garage sale taxes in Texas
• Yard sale yearnings
• State Tax Departments

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Comments

[Stephen]

I like the idea of garage sales, especially at a time when a lot of people will find the extra money handy, I am glad to hear that the profits are the sellers to keep as you say it is their unwanted personal items, it is not items bought to make a profit.