Collectibles in the past have been a great place to “invest” because of preferential tax laws.
In the US, Collectibles used to be able utilize 1031 exchanges to roll profits upon sale into a new purchase without paying tax. This amounts to massive tax savings and is an argument for why collectibles of many types increased so much in value.
A couple years ago, this changed and collectibles can no longer utilize 1031 exchanges.
Collectibles now get taxed at 28% capital gains rates upon sale. That is a HUGE change from not having to pay anything.
I feel this would have a negative long term effect on prices.
I think your right but I don’t know how big of an impact it would have. Instead of gains from a sale being rolled over and “invested” in more collectables a good chunk of that gain is going to Uncle Sam.
But then how many people were doing the right thing and filing 1031’s or reporting capital gains on collectables they sold on Instagram eBay or in person in the first place.
If the market was large and mature enough for this revenue to matter, people would invest in workarounds. When it comes to fine art collecting… People are rarely paying millions of dollars in taxes when they sell 8 figure paintings. From international waters storage facilities to tax havens to write offs, it is a big business to basically circumvent the IRS.
I report everything to IRS including friends and family and cash (maybe I’m a sucker). Big brain tip…get a CPA to do your taxes if you have a decent amount of sales. I had to pay taxes to federal, my state, and 12 other states for 2019, and the savings they found were very impressive.
I don’t really get it, that’s why I have a cpa do it ha. Apparently the states all have these thresholds and I met them in certain states. All I can say about it, I hate taxes or thinking about them.
I agree 100% that most sales in Pokemon don’t get reported.
I am all about decreasing taxes. However I worry that this mindset is just one more aspect of Pokémon that keeps it from reaching the same level of collectibles as other more serious collectibles.
Pokemon already has the stigma of being a kids game. We aren’t going to attract the level of serious collectors that other hobbies have if the current collectors, especially the sellers, don’t approach it seriously as a business.
If Pokemon is your primary business and you have an LLC, S-corp etc, and you run an online or retail store, you should be reporting your income as any other small business.
As for individual collectors… in this day and age I am not worried about being taken seriously due to taxes. For centuries the kind of collections that people take seriously (Antiquities, fine art, jewelry) have doubled as tax avoidance strategies. If someone spent $1M cash on a card and completely avoided paying income or other taxes on that $1M for the year, it would sadly likely work in the hobbies favor.
Tax laws vary by state so don’t take what I say as truth in yours, but I’ve done (some) research on this and here’s what I’ve come up with.
Many states will have a “garage sale exemption” where sales of used personal belongings are not subject to tax. This applies even if you get the 1099 from Paypal if you’re in a state with a lower transaction threshold. Where I am it’s $600, which is nothing so I get the 1099s all the time. If for some reason they choose to audit my broke ass, in order to have to pay taxes I would need to maintain an inventory, have a significant number of items for sale, and be purchasing for “investment/sale” purposes. I make an effort to not sell throughout the year and very rarely flip. That should cover me.
@jcincy101, bigger brain tip - get an accounting degree and become a CPA, then get a starting job with one of the big four accounting firms. next you’re going to want to work your way up by staying late nights, getting no sleep, and then wondering if any of it was worth it. the girl of your dreams left you, but this is your dream. at least you keep telling yourself that it is. it doesn’t matter, the pain stays the same. 12 years later you become a partner. you make 350k a year. at this point you can comfortably pay someone else to do your taxes, but you can’t. your brain has been reprogrammed to save every penny. while searching for ambien online, you accidentally open E4 forums and everything comes flooding back to you. everything that you used to love. those toys never made you money, but they made you happy. you can afford that PSA 10 1st Edition Charizard that is selling for 250k, and you don’t even have to tell yourself that it’s an investment. you’re a big shot. you made it. this is success. why doesn’t your daughter call you? doesn’t she like the BMW that you bought her for her 16th birthday? or was it her 17th birthday? the dates blur together, but it wasn’t that important anyways. the things that used to make you happy don’t anymore. what is wrong with you? you did everything right. your mind races at a thousand miles an hour. you reach down and the bottle is empty. that’s the third time tonight that you’ve reached for that same empty bottle. it’s emptiness frustrates you. no. your emptiness frustrates you.
