The IRS Will Pay You to Sell Your Stuff—If You Do It Right

Most people sell things online—whether it’s decluttering their closet on eBay, flipping furniture on Facebook Marketplace, or running a side hustle on Etsy. But did you know that, in some cases, the IRS will let you sell your stuff completely tax-free—or even claim a tax deduction if you sell at a loss?

That’s right: If you understand the tax rules, you can turn your old junk into tax-free cash (and in some cases, a tax write-off). Here’s how.

1. Selling Personal Items? It’s Usually Tax-Free

The IRS doesn’t tax casual sales of personal items—meaning if you sell your old clothes, furniture, electronics, or anything you originally bought for personal use, you don’t owe taxes on the profit unless you sell it for more than you originally paid.

Example:

• You bought a couch for $1,200 and sell it on Facebook Marketplace for $500.

• Since you sold it for less than you paid, there’s no taxable income—and you don’t have to report it.

• Even better? The IRS doesn’t care about the loss—so you don’t have to worry about deducting it either.

🚨 But Be Careful: If you sell something for more than you originally paid, you technically owe capital gains tax on the profit.

Example of Taxable Sales:

• You bought a rare watch for $500 and sold it for $2,000.

• Your profit is $1,500, which could be subject to capital gains tax (typically 15% for most people).

📌 Pro Tip: The IRS doesn’t tax the first $600 in third-party sales (like PayPal, Venmo, or eBay) unless you receive a 1099-K form from the platform. But if you exceed $600, expect the IRS to ask questions.

2. Selling at a Loss? You Might Get a Tax Deduction

If you run a business selling items, you may be able to deduct losses on your tax return. But what if you’re just selling personal items for less than you paid?

The IRS won’t let you deduct personal losses—but there’s a workaround:

If you donate instead of sell, you can deduct the fair market value of the item as a charitable contribution (if you itemize deductions).

Example of a Tax Write-Off:

• You bought a designer handbag for $2,000 but only get offers of $400 on resale sites.

• Instead, you donate it to a qualified charity (like Goodwill or a nonprofit).

• You can claim the $400 fair market value as a charitable deduction on your taxes!

🚨 Caution: The IRS expects reasonable valuations—so don’t try to claim a $2,000 deduction for a 10-year-old TV!

3. Running a Side Hustle? Here’s Where Taxes Kick In

If you regularly sell things for profit—like flipping sneakers, furniture, or collectibles—the IRS may consider you a business, not just a casual seller. That means:

✔ You may need to report all sales income on your tax return.

✔ You can deduct business expenses (like listing fees, shipping, and even part of your home used for inventory storage).

✔ You may owe self-employment tax if you’re making consistent profits.

📌 Pro Tip: If you’re making a business out of it, consider structuring it properly (LLC, sole proprietorship, etc.) to take advantage of additional tax deductions.

Final Thoughts: Sell Smart, Keep More Money

Selling personal items can be a great way to make extra cash—but understanding the tax rules can help you avoid unnecessary taxes and even score a deduction in the process.

✅ Selling personal stuff? No tax owed unless you sell for more than you paid.

✅ Selling at a loss? Consider donating for a tax deduction.

✅ Flipping for profit? You might need to report it as a business.

The IRS won’t stop you from making extra money—but they will expect their cut if you don’t play by the rules. So sell smart and keep more in your pocket!

Got questions about your resale income? Let’s talk before the IRS does! 🚀