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Tax
Tip of the Week |
Are you looking for ways to earn additional money this summer? The extra cash will no doubt come in handy, but it could affect your tax return.
Here's what you need to know about reporting requirements for common sources of secondary income.
- One-time
sales. Generally speaking, all income is taxable. For
instance, say you're an amateur horologist and you sell your personal
collection of vintage pocket timepieces. The difference between what
you paid for the watches and the sales price is a capital gain.
What about that single mid-summer house-cleaning garage sale? When you sell stuff you used personally for less than you paid for it, the sales need not be reported because the loss is not deductible.
- Sometimes
sales. Depending on the items sold, you may have capital
gains or ordinary income.
Periodic sales that generate income can also raise the question of whether you're operating a business or engaging in a hobby. The difference? If you're in business, you can generally deduct all your business expenses and even incur a loss. Hobby rules limit your deductions.
- Recurring
sales. Will you be buying goods in bulk to re-sell for a
profit? Do you intend to continually replenish your stock with thrift
store or garage sale items?
Regular sales activity may mean you've started a business and have ordinary income. That's true even if you sell via on-line auction and never receive an informational statement reporting the sales.
Contact us before you establish any new venture. We'll be happy to answer your questions about the tax issues.
Click here to view previous tax tips.
"Tax Tips" are published weekly to
provide useful tax information. Return to this site every week for
helpful tax-cutting suggestions, tax reminders, and current tax
information.
The information contained in this site is of a general nature and
should not be acted upon in your specific situation without further
details and/or professional assistance.
If you would like more information on anything in "Tax Tips," or if
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information from time to time, please contact our office. We're here to
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