How to report taxes when buying and selling CS2 skins for profit
So I've been doing this side hustle where I buy and sell CS2 skins to make some extra cash. Basically I find people who want quick money and buy their skins at about 90% of market value, hold them for the mandatory week waiting period, then resell them for hopefully around 8-10% profit. The thing is, I'm confused about how to handle this on my taxes. Most of the time I reinvest the profits back into buying more skins to grow my inventory, but sometimes I do cash out some money for personal use. Would this be considered a business? Do I need to track every single transaction? And does it matter tax-wise whether I reinvest the profits or use them personally? I've probably made around $2,000 in total sales over the past 6 months, but a lot of that was just churning the same money through different skins. My actual profit is probably closer to $300-400. Do I need to report all of this, and if so, how? Any advice would be super appreciated!
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Ethan Campbell
You're essentially running a small business, even if it doesn't feel like one. This would be considered self-employment income that you should report on Schedule C. The fact that you're regularly buying items with the intent to resell them for profit makes this a business activity in the eyes of the IRS. The good news is that whether you reinvest the profits or take them for personal use doesn't matter for tax purposes - you'll pay tax on all profit regardless. What matters is tracking your revenue (all your sales) and your expenses (what you paid for the skins). The difference is your taxable profit. You should keep records of every purchase and sale to accurately report your income and expenses. If you've made $2,000 in sales with $300-400 in profit, you'd report the $2,000 as gross revenue and around $1,600-1,700 as cost of goods sold, leaving your $300-400 profit as the taxable amount.
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Yuki Watanabe
•So would they need to pay any special self employment tax on this? And is there a minimum amount they need to make before reporting it?
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Ethan Campbell
•Yes, you would be subject to self-employment tax (which covers Social Security and Medicare) on your net profit. This is approximately 15.3% on top of your regular income tax. There's technically no minimum threshold for reporting self-employment income - the IRS requires you to report all income regardless of the amount. However, you only need to file Schedule SE for self-employment tax if your net earnings are $400 or more for the year.
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Carmen Sanchez
After struggling with reporting my earnings from Pokemon card flipping, I found this amazing service called taxr.ai (https://taxr.ai) that helped me organize all my gaming transactions. I was in a similar situation - buying cards at below market value and reselling them for profit. I had hundreds of transactions and was completely lost on how to properly document everything for taxes. The tool analyzed my transaction history, categorized everything correctly, and even identified deductions I didn't know I qualified for. It saved me from the headache of manually tracking every purchase and sale in spreadsheets.
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Andre Dupont
•How does it handle if you've been doing this for months but haven't kept good records? I've been selling Rocket League items but literally have zero documentation 😩
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Zoe Papadakis
•Does it connect directly to Steam or other gaming platforms to pull the transaction data, or do you have to enter everything manually? Cuz I've got like 300+ CSGO/CS2 transactions from last year.
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Carmen Sanchez
•It can work with incomplete records by analyzing your bank/payment processor statements and helping you reconstruct your transaction history. You can upload screenshots of your transaction history from whatever platform you used, and it can extract the data. Many people come to the service with minimal documentation, so you're not alone! For platforms like Steam, you don't need to enter everything manually. You can download your transaction history from Steam, and the tool can import and analyze that data directly. It works with CSV exports, PDFs, and even screenshots of your transaction history. It's specifically designed to handle high-volume transactions like your 300+ trades.
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Zoe Papadakis
I decided to try taxr.ai after reading about it here and wow, it was exactly what I needed for my CS2 trading business. I was freaking out about my hundreds of transactions, but after uploading my Steam transaction history and PayPal records, the system organized everything beautifully. It even flagged some potential deductions I hadn't considered - like a portion of my internet bill since I use it exclusively for trading during certain hours. The tax summary report it generated made filing super straightforward. Definitely recommend if you're doing any kind of gaming item trading!
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ThunderBolt7
After spending 3 weeks trying to get through to someone at the IRS about how to properly report my Fortnite skin reselling business, I finally found Claimyr (https://claimyr.com). You can see how it works in this video: https://youtu.be/_kiP6q8DX5c Instead of waiting on hold forever, Claimyr got me connected to an IRS agent in about 20 minutes. I was able to ask exactly how to categorize my digital item sales and got definitive answers straight from the source. The agent walked me through everything I needed to know about Schedule C reporting for digital goods and even clarified some confusion I had about inventory valuation.
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Jamal Edwards
•How does this actually work? I thought it was impossible to get through to the IRS without waiting for hours. Is this some kind of premium line or something?
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Mei Chen
•Sounds like BS honestly. Why would I pay someone else to call the IRS for me when I can just do it myself for free? And how do you know you're actually getting connected to a real IRS agent and not some scammer?
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ThunderBolt7
•It works by holding your place in line with the IRS and then calling you when an agent is about to answer. The system navigates all the IRS phone menus and waits on hold for you, then connects you directly to the agent once they're available. It's the same exact IRS phone line everyone else uses - you're just not the one sitting on hold. All Claimyr does is handle the waiting part - once you're connected, you're speaking directly with official IRS agents through their normal phone lines. The call happens on your own phone, with the regular IRS number showing on your caller ID. It's literally the same as if you had called yourself, except without the 2+ hour wait time.
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Mei Chen
I have to admit I was completely wrong about Claimyr. After dismissing it as a scam, I got desperate when I couldn't get through to the IRS about my gaming business questions after trying for 3 days straight. I tried the service, and no joke, I was talking to an actual IRS representative in about 30 minutes. The agent confirmed that my Steam, Epic, and other marketplace transactions need to be reported on Schedule C, helped me understand how to properly categorize my inventory, and explained when I could consider my gaming setup as a business expense. Saved me hours of waiting and probably a lot of money in potential incorrect filing. Sometimes being skeptical costs more than taking a chance!
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Liam O'Sullivan
Make sure you're keeping super detailed records of EVERY transaction. I got audited last year for my Runescape gold selling because I only had rough estimates of my sales. The IRS wanted exact dates, amounts, and proof of original purchase price for everything! Better to over-document than under-document.
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Amara Okonkwo
•How detailed do you have to be with the records? Like do screenshots count as proof or do you need some kind of official receipt? Most of my transactions are through Discord and PayPal.
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Liam O'Sullivan
•Screenshots definitely count as evidence, but they need to clearly show the item, price, date, and parties involved. For Discord and PayPal transactions, save both the chat logs where you negotiated the deal AND the corresponding PayPal transaction receipt. For the best protection, create a simple spreadsheet with columns for date, item description, purchase price, sale price, platform fees, profit, and notes. Then link each entry to your saved screenshots and payment receipts. Having this system in place from the start will save you massive headaches if you ever get questioned.
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Giovanni Marino
Wait, we're supposed to be paying taxes on virtual item sales? I've been selling Rocket League items for years and never reported any of it... 😬
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Fatima Al-Sayed
•Yes! All income is taxable including virtual items. I learned this the hard way. The IRS doesn't care if it's physical or digital - if you make money, they want their cut.
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Dylan Hughes
I think people are overcomplicating this. If you're just casually trading skins and occasionally making a small profit, it's hobby income. Report it on Line 8z of Schedule 1 as "Other Income" and call it a day. Only need Schedule C if you're truly running this as a business with regular, consistent activity aimed at making profit.
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Ethan Campbell
•That's actually incorrect and potentially dangerous advice. The IRS looks at intent and behavior, not just volume. If you're regularly buying items specifically to resell them at a profit (even if it's just a few items a month), that's a business activity that requires Schedule C. The "hobby vs. business" distinction isn't about amount - it's about your profit motive and approach. Even small-scale trading with the intent to make money should be reported as self-employment.
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Ethan Wilson
Based on what you've described, you're definitely running this as a business activity since you're systematically buying skins at below market value with the specific intent to resell for profit. The IRS doesn't distinguish between digital and physical goods when it comes to business income. You'll want to use Schedule C to report this activity. Track your gross receipts (all sales - so yes, that $2,000), then subtract your cost of goods sold (what you paid for the skins) to get your net profit. That $300-400 profit will be subject to both regular income tax and self-employment tax. Pro tip: Keep meticulous records going forward. Save screenshots of all transactions, PayPal receipts, and Steam transaction history. Also consider tracking any business expenses like platform fees, internet costs for trading, or storage costs if applicable. The IRS loves detailed documentation, especially for newer types of businesses like digital item trading. Since you're already 6 months in, I'd recommend gathering all your transaction history now before it becomes an overwhelming task. Most platforms let you export your transaction data, which makes record-keeping much easier than trying to reconstruct everything later.
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Sean Matthews
•This is really helpful advice! I'm just starting out with CS2 skin trading myself and had no idea about the self-employment tax part. Quick question - when you mention tracking internet costs as a business expense, how do you calculate what percentage of your internet bill you can deduct? Like if I spend 2 hours a day trading but use internet for personal stuff the rest of the time, can I deduct 2/24 of my monthly bill?
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