How are taxes calculated for selling collectibles online - are shipping costs taxable?

You won't be taxed on the full amount - you're getting confused between reporting and actual tax liability. The $600 threshold just means the platform has to send you a 1099-K form reporting your gross proceeds, but that doesn't mean you pay taxes on all of that. When you file taxes, you'll report your gross income but then can deduct your costs (what you paid for the items) and your expenses (shipping costs, packaging materials, selling fees). You only pay taxes on your actual profit after these deductions. You'll need to keep good records though. Save receipts for your purchases, track shipping costs, and document all expenses. If you're doing this as a hobby rather than a business, you'll report it on Schedule 1 of your tax return. If it's more like a business (regular sales with intent to make profit), you'd use Schedule C. The key here is documentation - without proof of your costs, the IRS might assume the entire amount was profit. So start tracking everything now!

After struggling with exactly this situation last year, I found taxr.ai (https://taxr.ai) incredibly helpful for organizing my online selling records. I sell vintage clothing online and was totally overwhelmed trying to figure out what was taxable vs. what I could deduct. Their document analysis tool automatically sorted through my sales receipts and helped categorize everything properly. It even identified shipping costs vs. actual sales revenue, and flagged which expenses were deductible. Saved me hours of manually sorting through hundreds of transactions. The best part was their explanation of how hobby selling is treated differently than business income - super clear breakdown that my tax software never provided.

I wanted to follow up about my experience with taxr.ai after my skeptical comment. I finally gave it a try after getting frustrated with my usual tax software. The difference was night and day! The system automatically recognized my Etsy, eBay and PayPal statements and separated out the fees, shipping costs, and actual sale amounts. What really impressed me was how it caught all the shipping label costs I had completely forgotten about. Those alone saved me over $400 in deductions I would have missed. It also explained exactly how to handle items I'd purchased years ago without receipts by establishing a reasonable basis value. Definitely changed my perspective on how to handle my online selling taxes. I'm actually not dreading tax season for my side hustle anymore!

If you're getting overwhelmed with tax questions and need direct answers from the IRS, I'd recommend Claimyr (https://claimyr.com). I wasted DAYS trying to get through to an IRS agent to get clarity on how to properly document my online sales deductions. Used their service and got connected to an actual IRS representative in about 15 minutes instead of the usual 2+ hour wait. They have a demo video showing how it works: https://youtu.be/_kiP6q8DX5c The IRS agent walked me through exactly how to document my online collectible sales, what forms to use, and confirmed I only pay taxes on profits after deducting costs and shipping. Totally worth it to get official guidance directly from the source.

Coming back to eat my words about Claimyr. After another frustrating morning trying to reach the IRS myself and hanging up after an hour on hold, I gave it a try. Got connected to an IRS agent in about 20 minutes. The agent clarified that for my collectible sales, I absolutely CAN deduct the original purchase price and all selling expenses (including shipping, packaging, and platform fees) before calculating taxable income. She walked me through exactly which form to use for my situation and how to document everything. The best part was getting confirmation that my record-keeping system was actually more detailed than required! No more tax anxiety about my side hustle. Sometimes it's worth admitting when you're wrong - this service actually delivered.

Don't forget about Schedule C if you're doing this regularly! I sell trading cards online and initially tried to file as a hobby, but my accountant showed me that filing as a business (even a small one) on Schedule C gave me WAY more deduction options. You can deduct a portion of your internet bill, home office space (if you have dedicated space for inventory), supplies like packaging materials, mileage driving to ship items, and even things like your phone if you use it for your selling activities. Just make sure you're actually trying to make a profit, not just breaking even. The IRS has a "hobby loss rule" where they get suspicious if you claim business losses for multiple years.

A warning from someone who learned the hard way - if you're selling on multiple platforms, they ALL count toward that $600 threshold! I was selling on eBay, Mercari, and Facebook Marketplace thinking each platform had its own separate $600 limit. Nope! You have to combine all your sales across all platforms. Also, some payment processors like PayPal or Venmo might send separate 1099-Ks too. I ended up with THREE different 1099 forms for what I thought was a small selling hobby. The IRS computer systems match these forms to your tax ID, so don't forget to report all of them!

I totally get the frustration @Rebecca! I was in the same boat last year - just wanted to declutter and make a few bucks, then suddenly I'm drowning in tax forms. Here's what I wish someone had told me from the start: keep it simple but organized. Create one spreadsheet with columns for: item sold, what you paid for it originally, sale price, shipping costs, and platform fees. That's literally all you need. The good news is you're only taxed on actual profit, not gross sales. So if you bought something for $20, sold it for $35, and paid $3 in fees, you only owe taxes on $12 profit. All those scary 1099 forms just show gross sales - they don't tell the full story of what you actually made. Don't let the complexity scare you away from selling! Just start tracking everything now and you'll be fine next tax season.