| eople ask me if they are required to report the profits | | | | from hobbies is taxable as well. |
| they earn on items they sell on eBay on their income | | | | You should decide before you even start selling on |
| tax return. In short, yes. | | | | eBay if you will be running a business, or if this will just |
| If you sell items on eBay for a profit, then you should | | | | be a hobby, or if you are just selling off collectibles. |
| report your eBay sales on your income tax return, and | | | | Each choice has its own tax consequences and its |
| you may owe income taxes on any profits. It doesn't | | | | own reporting requirements. |
| matter if its just a hobby or if you are trying to build a | | | | If your eBay income is a hobby, you still report your |
| business - if you earned a profit, its taxable income. | | | | income and expenses, but you are not allowed to |
| Generally, any income you receive from all sources is | | | | deduct expenses in excess of your income. Your |
| subject to income tax unless it is specifically exempt | | | | hobby income is reported on line 21 of Form 1040; |
| by law (hint: eBay profits are not exempt). | | | | expenses are reported on Schedule A as a |
| You must file a tax return if your net earnings from | | | | miscellaneous deduction, subject to the 2 percent |
| self employment are $400 or more. You are self | | | | Adjusted Gross Income (AGI) floor. This means if you |
| employed if you carry on a trade or business for profit. | | | | do not itemize you could lose the ability to deduct any |
| If you are selling on eBay with the intent of making a | | | | expenses against your hobby income, and even if you |
| profit, then you are self employed. | | | | do itemize, you can only deduct the amount of |
| To report your eBay earnings, you should file Form | | | | expenses that exceed 2 percent of your AGI. |
| 1040, and attach Schedule C or C-EZ. Schedule C is | | | | If your eBay income is from the sale of collectibles |
| used to calculate your net profit or loss from your | | | | (artwork, antiques, stamps, coins) then you will report |
| business, which is then reported on your Form 1040. | | | | the gain from your sales on Schedule D. The capital |
| This is assuming you are a sole proprietor. If you are | | | | gain tax rate for collectibles is 28 percent. Losses on |
| incorporated, you have to file a separate business | | | | the sale of collectibles are not deductible. |
| return. You will file Form 1120 or Form 1120s (for S | | | | As you can see, it is very important to decide how |
| Corporations). If you are a partnership, you will file | | | | you will be treating your eBay activity so you'll know |
| Form 1065. | | | | your tax responsibilities from your activity from day |
| At this point, you may be thinking 'I don't run a business; | | | | one. |
| I just sell on eBay as a hobby'. Unfortunately, income | | | | |