Trading Card Taxes

The IRS rules for selling trading cards depend on whether you’re operating as a business or a collector.

This post is provided for general information only. Please confirm the details and circumstances of your unique situation with your tax accountant or other appropriate advisor before taking action.

Buying and Selling Trading Cards as a Business Activity

Collecting is a hobby, but if your primary purpose is to buy and sell cards without actually maintaining a collection, then you’re a business. Businesses pay a higher tax rate, but you can deduct all the expenses associated with running that business from your income tax return.

As a business, there are two different taxes you need to pay. The first is income taxes according to your tax bracket.

The second is self-employment tax. For most people, the self-employment tax rate is 15.3%

Tax Consequences of Selling Trading Cards You Held as Collectibles

Collectibles are considered tangible personal property subject to capital gains taxes when you sell them at a profit.

There is a special capital gains tax rate when you sell collectibles. It’s not the usual capital gains tax rate that you might pay on selling stocks or cryptocurrency.

The long-term capital gains tax rate for collectibles is 28% regardless of your income. Short-term capital gain on collectibles are taxed at your ordinary income tax rate.

Finally, unlike with other capital gains, you can’t take a deduction for any trading cards you sell at a loss.

Calculating Your Taxes on Trading Cards

Your capital gain on selling trading cards is what you sold the card for minus what you paid for it.

What you paid for the card is called the basis in technical tax terms. The basis for a card you bought individually is its purchase price. The basis for a card you bought as part of a package is the price of the pack divided by the number of cards in it.

You will need to keep your receipts and other records as long as you hold your trading cards if you want to deduct the basis when you sell them.

Avoiding Trading Card Taxes by Donating to Charity

If you want to get rid of trading cards because you no longer want them, you can reduce your taxes by donating them to charity.

Subject to the usual charitable donation rules, you can take a deduction for the full fair market value of the cards at the time you donated them. You do not have to pay any capital gains tax like you would if you had sold them.

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