You understand clearly selling personal use items at a loss cannot be used to offset other income. Although these concepts aren't complicated, recordkeeping is a must and falls to the taxpayer to provide and and prove the gain and/or loss. If there is no record that clearly and reasonably can show cost, then all of the proceeds are taxable gain. This doesn't mean you can't keep better records going forward, or that you can't figure out the cost of sold items for 2024. A spreadsheet could be helpful in the future.
The tax law is clear. The cost of any item for resale is what you paid for it, or the cost of any item(s) you traded for it. Also, the tax law is very clear that the individual taxpayer is the recordkeeper of the information, required to supply it if and when requested.
You must decide what to use for cost, selling price and what sales do result in personal loss.
There is a difference between a hobby and a business. For your review, here are the IRS guidelines on Hobby vs Business. You can decide if it is hobby or business income. This IRS link will help you: Business or Hobby?
Key elements:
- A hobby requires you to report the income you received and under the current tax law, Tax Cuts and Jobs Act (TCJA), no expenses are allowed to be used to reduce the money collected even if you itemize deductions.
- A business allows you to deduct the costs necessary to obtain the income. The law explains that 'you must be engaged in the activity to produce a profit'. The test under IRS tax law is that you must show a profit three out of every five consecutive years to be considered a business.
Once you decide what type of income this is you can use the links below to see how to report.
@sydney1964
[Edited: 02/25/2025 | 6:55 AM PST]
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