Hey guys, maybe there’s a better place for this, but I’ll start here. Let’s just say I wanted to start a “Pokémon eBay store” and went out and spent $1k on a ton of cards, and then another $1k on grading services, could I write off the grading services? I understand the buying of the cards vs the selling would be my net gain/loss, but wondering where cost like shipping and grading come into play. Thanks
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Yes, you can write off grading, shipping, printer for printing labels, eBay fees,…
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You should get an accountant. The rules change based on how you file. They’ll be able to recommend how to file based on what you’re doing.
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Know that cards aren’t “written off” until you sell them.
E.g. if I were to buy 2 cards for $1,000 each and sell one for $2,000, I have a gross profit of $1,000 to pay taxes on (less expenses). The $1,000 for the other card is carried as inventory and not deducted or factored into my costs of good sold until it is actually sold.
So you cant just go on a spending spree after a big sale to cancel out the need to pay taxes on those gains.
As churlocker mentioned it is best to consult with a CPA for your local laws and your specific situation.
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Interesting, thanks guys
Unless you file as a cash basis inventory. And then you can write off, but you never appreciate or depreciate inventory.
Which is why a CPA is going to be so critical. Totally opposite correct answers in different circumstances.
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This is where you start:
www.irs.gov/businesses/small-businesses-self-employed/deducting-business-expenses
Be careful with what you are deducting. People running businesses automatically puts you in a higher audit category. If you get audited they will disallow all deductions and then make you prove that you are entitled to them so make sure you document ALL expenses and be ready to justify why they are essential to your business. The key is the expense must be “ordinary and necessary” to your business. If you can’t produce an invoice to justify the expense then that might be sufficient grounds for the auditor to disallow your deductions.
As the others have said, getting a CPA to review what you are doing is generally worth it.
This is why I have a section in one notes for all my large expenses so i can see the net cost of each set. I also have a excel spreadsheet that combines all my expenses/purchases into one total. It has separate categories for each set, and expense category. It’s a bit tedious, but in the long run I imagine it’ll help.
Hey guys so this post has me thinking. How much money do you have to sell in cards on ebay before you have to file taxes if that’s only income?
I don’t know much about taxes, I pay an accountant to handle my financials. But he counts my inventory as a “running inventory” he says. So if I spend 50k on inventory and expenses and sell 50k it shows I made $0 for that year.
I’m sure it varies by state but here are some thing I write off.
-Cards
-Penny Sleeves, Card Savers, top loaders
-Shipping Supplies, postage costs,trips to the post office gas mileage
-PSA grading fees, eBay fees, PayPal Fees, a 3rd party eBay listing manager annual fee
-Internet, new phones, phone bill
-Any new tech like laptop, scanner, label printer along with the paper and labels for these machines
-Office space in my home, I believe it’s $5 per sq foot for my state
Now all of these things need to be used predominately for your business to count.
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Another pokemon flipper business is born 
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I’m not 100% sure but my first few years I only did about 5k in sales and my accountant says I can consider it a hobby and not count it, once I started doing over that I needed to start a legal business.
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Thanks just future reference or if I sold a few thousand worth I just wanted to make sure I wasn’t in the wrong. Thanks for the info 
TIL. I was going to come back and say you were wrong on this and that if you carry any inventory at all you have to use the accrual method of accounting but apparently that changed in 2017 with the Tax Cuts and Jobs Act. I paid a CPA from 2011 to 2015 to do my taxes and consulted with him and others to learn the ropes. I poured over line by line every return he filed for me. What I do is relatively small scale so I have been able to do it myself since then, but as you can see some things change. Our tax system is needlessly and endlessly complex and a professional is always the best way to ensure you are doing everything proper. Small mistakes can lead to big issues down the line with the IRS and even that aside, a CPA may be able to find you more deductions and write offs than you would have found yourself which was the case with me as well.
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Shipping would be considered a selling fee and would be deducted like any other fees before finding out your profit. I personally add grading fees into the purchase price of the card for example if I purchased a card for $500 and sent it in express to PSA for $75 fee I’d add that $75 (print my receipt) to my purchase which would then mean I have $575 in my now graded inventory item, I will then put my shipping costs to and from PSA as a business expense.
100%. Literally impossible to live a life and keep up on the tax law. Pay someone to do that for you. Haha.
Tax accountant who is currently sitting for the CPA exam here. I will echo what the others have said that utilizing an experienced CPA is well worth the money if you are doing a reasonable number of sales and have no idea how to file Schedule C.
Another thing I would add that doesn’t get discussed often - if you sell cards that you have held for more than one year (especially high end stuff), you should discuss recognizing the sale of them as a sale of capital assets on form 8949 with your CPA. This will treat the income as a long term capital gain which has a more favorable tax rate. Cap gain rates in collectibles can be higher than standard securities depending on your income level, but it is still better than ordinary income rates and you will also avoid self-employment tax. Again, talk to you CPA first though as your situation may vary and this doesn’t apply to all situations, but little things like that are why you want to have an experienced tax professional on your side.
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