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Is the IRS Taxing Garage Sales?


Content provided for general information. Talk to your advisor to learn about recent updates or other rules that may apply to your situation.

The IRS isn’t taxing garage sales, but you still might get an IRS letter if you take app payments. Here’s what you need to know.

Do you pay taxes on garage sales?

You normally don’t pay any taxes when you have a garage sale.

Selling your old stuff at a loss isn’t a taxable transaction. (Technically you’re deducting the purchase price from the money you got from selling it.)

If you sell antiques, trading cards, or other collectibles for more than you paid for them, you may have to pay taxes on those sales.

Finally, if you make crafts or baked goods specifically to sell at a garage sale, that would usually count as business income. Even if you’re calling it a garage sale (or have traditional garage sale items), making or buying things to sell is a business.

Note: Some states may require you to collect sales tax when you sell at a garage sale. Check your local rules before hosting a garage sale.

Should you accept PayPal, Venmo, Cash App, or other money app payments at a garage sale?

App payments are becoming increasingly popular at garage sales. Many people just don’t carry cash anymore, and it’s also easier for the seller to deal with.

Taking app payments can increase your sales, since people who were just driving by may not have cash on them.

There is a small chance of someone fraudulently disputing a transaction. If you’re selling high-value items, you may want to check the app’s policies before deciding to use it.

If you receive more than $600 through an app during the year, you could also get a Form 1099-K.

What happens if you get a 1099-K for a garage sale?

Even though a 1099-K is a tax form, getting one doesn’t mean you owe taxes. It just lets the IRS know you received money that’s not taxable.

You can try to contact the issuer and ask them to correct the 1099-K (such as changing it to $0) since the transactions were personal. However, some payment services are reporting all transactions no matter what they were for.

There are mixed opinions on how to handle a Form 1099-K you don’t need to pay taxes on.

If the money was from a garage sale and not taxable, you can leave it off your tax return. However, you might later get a letter from the IRS asking why you didn’t report that income.

Some people say to report the income and then claim a deduction to zero it out. This is more of a workaround that can still get your tax return flagged. You’re just hoping that the IRS sees what you did and decides it doesn’t need to contact you.

What happens if you get a letter from the IRS for garage sale money?

If you get a letter from the IRS saying you owe taxes on garage sale income, you probably don’t. When you get a 1099-K, they have no idea the money was for a garage sale.

The point of Form 1099-K is to reduce the number of businesses that weren’t reporting their income, so the IRS will often ask why they have a 1099 you didn’t report.

Normally, you can explain that you had a garage sale and the money isn’t actually taxable. In most cases, the IRS will accept your explanation. They’ll cancel the changes to your tax return and won’t charge you more.

If the IRS was holding your refund, you should normally get it in 2-4 weeks after you respond. However, since the new 1099 rules are causing a lot of problems, it could take the IRS longer to process things.