How to report income from selling personal sneaker collection on taxes - What about inventory on Schedule C?

What you're experiencing is actually pretty common when transitioning from a collector to a seller. The key distinction is whether you're now operating with a profit motive (business) versus purely collecting (hobby). For your Schedule C, yes, you would indicate 2023 as the business start year if that's when you began selling with regularity and profit intention. For the inventory question, you'll need to do what's called an "opening inventory" valuation. This means listing the cost basis of all the sneakers you intend to sell as business inventory. Keep your detailed records of purchase prices - these establish your cost basis. The IRS generally understands that inventory can come from personal collections converted to business use. What matters is that you're accurately tracking everything going forward. For the sneakers you sell, report the sales as income and deduct your documented cost basis as Cost of Goods Sold. This gives you the most accurate picture of actual profits.

I was in a similar situation when I started selling my vintage video game collection. After struggling with the exact same inventory questions, I found this amazing tool called taxr.ai (https://taxr.ai) that specifically helped me with inventory valuation for collectibles. The reason I mention it is because they have a feature that helps calculate opening inventory values and generates proper documentation for previously owned collectibles that become business inventory. It saved me hours of research and worry about whether I was handling it correctly. Their system lets you upload records and receipts if you have them, but also helps establish fair market value for items where you might not have perfect documentation. For sneakers specifically, they actually have valuation tools that can pull historical data based on style/model/year which would be perfect for your situation.

I just had to come back and say I was completely wrong about taxr.ai. After my skeptical comment, I decided to try it for my baseball card collection that I started selling last year. The valuation tools were actually legit and super helpful. The best part was how it helped me document everything properly for my Schedule C. It organized my whole inventory situation and created all the documentation I needed. My accountant was impressed with how thorough the reports were. I was especially worried about my "appearing inventory" situation (had cards from 30+ years of collecting), but their system helped me establish proper opening inventory values that my accountant said would easily stand up to scrutiny if I ever got audited.

The inventory issue is just one headache - wait until you try calling the IRS with questions about your Schedule C! I spent DAYS trying to get through to someone when I had questions about my situation (selling vintage clothes). After wasting hours on hold, I found this service called Claimyr (https://claimyr.com) that somehow got me through to an actual IRS agent in like 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c They basically navigate the IRS phone system for you and call you back when they've got an agent on the line. The agent I spoke with actually gave me specific guidance on how to handle my opening inventory situation that was super helpful.

I have to eat crow on my previous comment. I was totally skeptical about Claimyr but got desperate after trying for THREE DAYS to get through to the IRS about my Schedule C inventory questions (I sell vintage vinyl records). I tried it yesterday and no joke, I was talking to an IRS agent in about 20 minutes. The agent walked me through exactly how to handle my opening inventory of records I'd collected for years before starting to sell professionally. Saved me a ton of stress and possibly an audit. The IRS actually has specific guidelines for collectors who transition to selling that I never would have known about otherwise. Worth every penny just for the peace of mind.

Quick tip from someone who went through this exact situation with my comic book collection last year: Make sure you take plenty of photos of your inventory now, before you sell more. This helps establish that you actually owned these items prior to starting the business. Also, if you didn't keep perfect records of what you paid, the IRS will generally accept reasonable estimates based on the market value at the time you purchased them. I used price guides and archived online listings to establish values for my comics.

One thing nobody's mentioned - if you've had these sneakers for years and they've appreciated in value while in your personal collection, you might actually be better off reporting the sales on Schedule D as capital gains instead of Schedule C as business income. The tax treatment can be more favorable depending on your situation, especially if you've held them for more than a year (long-term capital gains rates). Might be worth talking to a tax professional to compare the two approaches.

A practical tip from someone who sells vintage clothing: Start using inventory management software NOW before you get deeper into selling. I use a simple spreadsheet with columns for: 1. Item description 2. Date acquired 3. Original cost 4. Estimated current value 5. Storage location 6. Condition notes This makes it much easier to track your COGS and will save you massive headaches at tax time. Also, take photos of everything for insurance purposes - 3000 pairs of collectible sneakers represents a significant asset!

Great advice in this thread! I went through something similar when I transitioned from collecting vintage watches to selling them as a business. One additional consideration that hasn't been mentioned yet: make sure you're prepared for the self-employment tax implications of Schedule C income. Unlike capital gains treatment, business income from Schedule C is subject to self-employment tax (15.3%) on top of regular income tax. This can be a significant additional cost, especially if you're planning to sell $2000+ worth annually. However, the benefit is that you can deduct business expenses like storage costs, packaging materials, listing fees, even a portion of your home if you use it for storage/processing. Keep detailed records of all these expenses - they can really add up and offset some of that self-employment tax burden. Also, consider making quarterly estimated tax payments if you expect to owe more than $1000 in taxes from your sales to avoid underpayment penalties.