Calculating tax on barter (private party)

[rwom1217]

I traded some items with another person (no cash involved).  Are the values for tax purposes calculated based on what I originally paid, original retail value, current retail value, or current market value?

Do monies I originally paid for the items I traded (including taxes) change anything I enter like values or gain?

Would this go under investment income?

[CatinaT1]

This will go under Less Common Income.

1. When you are in the Less Common Income Section, select Start next to Miscellaneous Income, 1099-A, 1099-C
2. Select Bartering income not already reported

When you get to where you need to Enter your bartering income, you'll have to convert the goods or services you received to a cash value by finding its fair market value.  The fair market value is the actual cash value that the goods or services are worth to the public. In other words, find out how much it'd cost to buy the goods or services you received.

Be sure to click on the blue Learn More for additional information. The window that will open also has examples and how to find the fair market value.

[rwom1217]

Is the actual cash value based on what they'd sell for at retail, or what they would sell for on places like offerup, ebay, etc?

[RobertB4444]

It's what it would cost you to buy it.  Assume you would pay the lowest possible price in order to get it in a condition as close to identical to the condition they were in when you traded them.

@rwom1217 

[rwom1217]

Is the income amount I enter the difference between the FMV of the items traded?

I.E, if he gave me something worth $200, and I give him something worth $190, would I enter $10 as my income?

[DianeW777]

Yes, your income in the transaction is $10. You had to trade something that was part of the transaction so your income or profit is the $10. Report it as instructed by @CatinaT1 

@rwom1217 

[fellynbal]

Joining this conversation.  

What should you do if you gave goods to others in a different year or so, than the year you received anything in return, and vise versa.  How do you report that, for example:  If I received cooked meals etc. when visiting someone in 2023, but in 2024 year I in return made desserts?  Does it get reported for the year you received the goods or the year you  gave the goods, or do you have to Amend a tax return go back to 2023 report GAIN for that year, and then 2024 tax return count as a LOSS that year?  Until you give something in return, is that actually considered Bartering or any kind of tax reporting income whatever it may be considered.?  

[BrittanyS]

Here is what the IRS considers bartering, "Bartering is the exchange of goods or services. A barter exchange is an organization whose members contract with each other (or with the barter exchange) to exchange property or services. The term "barter exchange" doesn't include arrangements that provide solely for the informal exchange of similar services on a noncommercial basis (for example, a babysitting cooperative run by neighborhood parents). In bartering, usually there's no exchange of cash. An example of bartering is a plumber exchanging plumbing services for the dental services of a dentist."

So in your example if you provided a service for the baked goods that would be considered bartering.  If you provided the meals with no expectation of services then it would not be considered barter.  

@fellynbal