You’ve heard about the new IRS reporting thresholds for Form 1099-K that went into effect this year, but you may have some follow-up questions about how it applies to you. Let’s look at some common concerns we see from online sellers and how to handle some unique situations, like pricing and selling inherited items. You only owe income tax on the net profits you make from a sale. To determine your profits, you need to keep track of each item’s sale price and any other expenses related to the sale. How to calculate your taxable income from an online sale If you are a casual seller and you sell a personal item for more than you originally paid, the profit you make is considered a capital gain. Capital gains are taxable income and must be reported on your tax return using Schedule D. To determine your taxable gains when selling personal assets, you will need this formula: Sale Price (what you sold the item for) – Cost Basis (what you paid for the product + any fees associated wi...
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