How do you navigate the tax burden of selling expensive cards?

[Exhibitman]

The secret of America is...money, Pete. Everything is money.

https://youtu.be/qHDBDTlrp0o

[Jewish-collector]

Remember the Cyndi Lauper song, "Money Changes Everything"
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[Popcorn]

Taxed when you buy and taxed when you sell. Make some dough pay the toll lol

[molenick]

I am unclear how declaring yourself an "investor" or a "collector" on a tax form would change your tax responsibility if you sell a card for profit. I am also not clear where on a tax form this would be noted...there is a place for your occupation, which for most of us would be our 9-5 job. I don't see anything on Schedule D that asks if I am a collector or investor.

Maybe I need a new accountant!

[Edited to add that I just read the link from sb1 which was informative (even if I didn't understand it all). I can see the difference between someone who's job it is to buy and sell collectibles (e.g., a dealer) and someone who is buying them but whose job is something else. The investor/collector difference is still eluding me...unless it is that you can claim your occupation is "investor" and that will make a difference.

[BobC]

Originally Posted by molenick

I am unclear how declaring yourself an "investor" or a "collector" on a tax form would change your tax responsibility if you sell a card for profit. I am also not clear where on a tax form this would be noted...there is a place for your occupation, which for most of us would be our 9-5 job. I don't see anything on Schedule D that asks if I am a collector or investor.

Maybe I need a new accountant!

[Edited to add that I just read the link from sb1 which was informative (even if I didn't understand it all). I can see the difference between someone who's job it is to buy and sell collectibles (e.g., a dealer) and someone who is buying them but whose job is something else. The investor/collector difference is still eluding me...unless it is that you can claim your occupation is "investor" and that will make a difference.

The big difference between a "collector" and an "investor" is that if you sell a baseball card you can argue you treated as an investment, and it sells for a loss, you can deduct that loss against other taxable gains on your return, and potentially all other taxable income on your tax returns, just like if you sold a stock you owned for a loss. However, if a card you sold for a loss was instead treated as sold by a "hobby collector" as a pure collectible, and not as an investment, you cannot deduct any of that loss against taxable gains, or any other taxable income on any of your tax returns.

Another potential difference is the max long term federal capital gains tax rate on selling investments, like stocks, which is capped at 20%. The max federal LT capital gains tax rate on a collectible is capped at 28%. The trick is to be able to prove that your cards are investments and not collectibles, which isn't necessarily a slam dunk and easy to do if you get questioned about it by the IRS. There can be some risk involved in trying to push the investor/investment side.

[Hordfest]

Originally Posted by BobC

The big difference between a "collector" and an "investor" is that if you sell a baseball card you can argue you treated as an investment, and it sells for a loss, you can deduct that loss against other taxable gains on your return, and potentially all other taxable income on your tax returns, just like if you sold a stock you owned for a loss. However, if a card you sold for a loss was instead treated as sold by a "hobby collector" as a pure collectible, and not as an investment, you cannot deduct any of that loss against taxable gains, or any other taxable income on any of your tax returns.

Another potential difference is the max long term federal capital gains tax rate on selling investments, like stocks, which is capped at 20%. The max federal LT capital gains tax rate on a collectible is capped at 28%. The trick is to be able to prove that your cards are investments and not collectibles, which isn't necessarily a slam dunk and easy to do if you get questioned about it by the IRS. There can be some risk involved in trying to push the investor/investment side.

Thanks Bob! You seem to be the resident accountant around these parts. Lots of reading to do for me.

[Jewish-collector]

BobC is the greatest !!! If I can get out to the Strongsville show, I want to meetup with him.
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[BobC]

Originally Posted by Hordfest

Thanks Bob! You seem to be the resident accountant around these parts. Lots of reading to do for me.

Yes, I passed the CPA exam in one try and started out working for a Big Eight accounting firm back in the 70s, so I've been doing this awhile. LOL
There are other accountants and tax preparers on here, I've just been speaking up a lot more lately because of all the crazy changes going on the past few years. And to hopefully offset some of the real crazy stuff that sometimes get posted by people who may have believed they knew, but actually had bad information they were passing on that was totally wrong.

And the reading can get very confusing real quick. If there is something you're still not sure of after reading through all those threads and posts, just ask.

[Yoda]

Originally Posted by Hordfest

Thanks Bob! You seem to be the resident accountant around these parts. Lots of reading to do for me.

I think I just became an investor rather than a collector.