1. How do I report the original cost of my clothes? Yes, any proof that you have that shows the amount you paid works.
2. What if I sold for less than what I paid? You will only include amounts up to what you received. If you wish to take a loss, you must treat this as a business.
3) Will I only be taxed on the net gain that I made? Yes, if you have one. Since you are zeroing out your income, you shouldn't have one.
Please see this answer from @PattiF.
For reporting Form 1009-K for personal items sold not associated with a trade or business, you can report this as Miscellaneous income.
- From the left menu, go to Federal and select the first tab, Wages & Income
- Add more income by scrolling down to the last option, Less Common Income, and Show more
- Scroll down to the last option, Miscellaneous Income, 1099-A, 1099-C and Start
- Choose the last option, Other reportable income and Start and Yes
- Enter the applicable description and amount and Continue
- First, enter Form 1099-K as received. It is essential that the full amount be entered.
- Next, enter an adjustment as a negative number to reflect the cost of these items and the sales expenses (but not more than the sales price. You can't produce a loss.)
