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Level 3

eBay sales considered a business?

In 2018 I mostly sold used bike parts on eBay that I had which totaled around $3000 for the year. I'm not sure if I should consider this a hobby or business when I file my taxes. Most of the bike parts I bought I didn't have the intention to sell them when I bought them but have not used them in a while so I figured I would get some extra cash. I have not gotten any tax forms from eBay or Paypal so would it be best to file this as a hobby or a business with the IRS?

 

Thank you in advance.

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Employee Tax Expert

eBay sales considered a business?

It depends, please see the list below and apply them to your situation.  Essentially, if you intend to continue this to earn extra money (profit motive), the IRS will likely consider it a business.  If you are doing it solely to clear out clutter, it would be a hobby.  This IRS Article has some tips about Hobby or Business?

 

Generally, an activity qualifies as a business if it is carried on with the reasonable expectation of earning a profit.  In order to make this determination, taxpayers should consider the following factors:

  • Does the time and effort put into the activity indicate an intention to make a profit?
  • Does the taxpayer depend on income from the activity?
  • If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?
  • Has the taxpayer changed methods of operation to improve profitability?
  • Does the taxpayer or his/her advisors have the knowledge needed to carry on the activity as a successful business?
  • Has the taxpayer made a profit in similar activities in the past?
  • Does the activity make a profit in some years?
  • Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?