This is nothing groundbreaking but as prices have skyrocketed, taxation of collectibles is becoming more relevant and should be something we take into consideration when selling items.
When you make a sale after keeping an item for 1 year, you eventually need to pay capital gains taxes on your profit, which is 28%
So if you sell an item for 4000 and you bought it for 400 a year ago (which is a realistic example), you made 3600 profit and you will pay 1008 in capital gains taxes. That means you actually only get around 2600 “profit” after taxes. This is not even including eBay fees and shipping etc which can be 10% of the sale price.
As a hobbyist who does not do this for a living, I had sticker shock after realizing this. I’m sure a lot of people will feel the same after paying taxes this year. Anyway, my point is that capital gains tax can be avoided if you just trade instead of sell. In fact, you can trade for an item that is up to 1000 less in value and still come out ahead in my example. Taxes are even more relevant for big ticket items like the illustrator.
FYI, I’m not a CPA, and this discussion only applies if you live in the US. Any CPAs out there, please correct me if any of my assumptions are wrong.
I’ve been thinking of trading lightly played WOTC holos for eseries commons/uncommons rather than try and sell them for similar reasons. Plus, there is a charm to trading cards vs buying and selling. However, I’m not sure how you’d be able to safely do this with very expensive cards without a middleman, which likely carries it’s own cost.
I am fairly new to the hobby, came back in late 2019. Obtained an insane deal on a 1st edition base, 1st and unlimited jungle, shadowless, and base unlimited lot. I’ve been trading fairly good condition cards from that lot for cards that I need for my binders. While I’m essentially losing in the value department, I’m gaining all that back in the joy department. One recent example was a gentleman who was going for a shadowless binder while I needed most base set cards; we did a 1 for 1. Can’t agree more @justinmew,
Trading is the spirit of the hobby, It also makes sense as part of the monetary management strategy. I wish people traded more. They take some work at times, but they give you that good feeling dopamine rush—especially when they are win-win. And they are almost always intended as such, though they can lead to regrets, too! I like that gambling part of it as well when the goal isn’t just filling holes in collection goals.
In the UK it doesn’t work like this sadly. If you sell a card you acquired for £5 for £10 you’re expected to pay taxes on the £5 you profited; likewise if you were to trade the same card you acquired for £5 for a card at that time valued at £10 you’d still need to pay tax on £5 - the transaction may not have been monetary but the item you acquired still has a monetary value.
Whether anyone in the UK would actually declare tax on items they traded is of course another thing, but certainly if the trade garnered enough attention (like the recent Illustrator/Charizard trade) it wouldn’t be surprising in the UK if you suddenly attracted the attention of HMRC.
I love trading as it gives me an excuse to pick up cards that are completely outside my collection goals. I never would have bought a secret wonders blastoise but I did trade for one last week
I’ve been keeping an eye on Sports Cards and a lot of these flipper/grinder/investors move cards between each other and pay the small difference if the values are different. This significantly reduces the cost, you are correct with sites like Ebay who are doing all the winning with things like Pokemon at the moment. They make there 10-15% regardless and if that cards gone through 3/4 hands which is definetly possible ( going from a box sold eventually into a collection which is then sold as a single which is then sold to another person and graded and then sold in its final form) they take almost half the value of the card in essense between those transactions.
“The pursuit of a hobby by an individual may be to supplement wages, create income after having lost a job, test the waters for a new commercial venture or simply follow a passion. The pursuit of a hobby is not the same as carrying on a business for taxation purposes, which means that money derived from a hobby is not income and therefore is not assessable. Conversely, hobby expenditure is not tax deductible.”
For trades though, shouldn’t they be ideally of equivalent value? So there are no gains or losses. Again, not a cpa here. Do not want to encourage tax evasion.
That’s really true. But for trades you need…
-friends who collect
-who have the cards you want, and want your cards
that’s where I gave up a lot of the cards I want are too rare for someone on facebook to likely have.
I know that efour used to have trading threads, apparently they were banned because they just became alternatives to “sell” threads. I wonder if they could work better if they were brought back with a similar rule to the buy thread, where you have to state what you want in the trade off the start. Plus in their own separate forum for those who just want to browse Buy threads and not get spammed out.
If you are more than happy to trade down in value for something you want then by all means go the trading route but it is hard to find trades of equivalent value these days.
Yeah I agree. My point was that even trading down for something you want may actually make more financial sense than selling for market value depending on your situation.
I’m not from the US but wondering; Except for the high-end cards (say 10K+ USD); Are tax authorities coming down on collectors (in those numbers or at all)? It seems like something that’s been more in the discussion as of late but has no much data except for some articles regarding sports cards.
If the card collecting market will grow I suspect it will drive more authorities’ attention and similar to other markets; it will reflect in the prices of the cards in some way.
I personally did not get a lot of opportunities to trade due to COVID but I would definitely prefer trading cards as it’s one transaction that saves extra two transactions for the parties which sounds exactly like something tax authorities would pay extra attention to as you’re treating the collectible as the currency.
You would need to check the IRS page on bartering. The way I understand it is if you trade the $4000 item for another $4000 item, you’ve still made $3600 in capital gains.
If your intent is to buy and sell for profit, you must declare the earnings.
If you have Pokemon cards as a hobby and decide to sell them, you don’t have to declare the earnings… but if you then start buying and selling your hobby products for profit, you then have to declare the earnings.
I’m on the fence in my case haha. I talk about reselling for profit, yet theres a chance I never will sell as I enjoy collecting.
a lot of the cards I want are too rare for someone on facebook to likely have.