@SweetieJean wrote:
The linked answer states this:
Antiques are considered to be collectibles.
OP's instrument is older than the one cited in the link. But in any case, it may be hard to prove the original cost.
The US customs service definition of an antique is something that is more than 100 years old.
If the instrument is not 100 year old, then the sale will be a long-term capital gain. If you were a professional musician, and never depreciated the original $700 cost, your cost basis is $700 and your capital gain will be about $5300, which will be taxed as a long-term capital gain at a lower rate (zero, 15% or 20% depending on your other income).
If the instrument is overall more than 100 years old, and you have not been using it professionally, then I would agree it is a "collectible" and is taxed at a higher rate (your regular income tax rate up to a maximum of 28%). Most people's regular tax rate is 22% or 24%. Again, only the gain is taxed.
If you previously were a professional musician, then you could or should have depreciated the instrument on your tax return during the years you were a professional. That changes your cost basis and we need to know more details about your career. Also, if you were previously a professional musician, I am not entirely sure that the instrument would be a "collectible" even if it were older than 100 years. I'm not sure the regulations contemplate taxing a working piece of business property the same as if it were under glass in a museum somewhere. But I would have to do more research on this.
If you have a $5300 or $6000 lump sum of income during the year, you may be required to make an estimated tax payment to avoid a penalty. 20% is a safe estimate for the IRS (it's close enough to avoid a penalty no matter what rate you end up paying), and 5% for Georgia. You can make a payment to the IRS at www.irs.gov/payments. You will have to look up Georgia's tax web site yourself. Your actual tax is calculated on your tax return at the end of the year, taking all your income, deductions and credits into account, and if you paid too much or too little, you will get a refund or owe more tax when you file.
