Understanding Taxes on Reselling
Consult a tax professional or research to ensure compliance. Determine your profit, the first step.
New federal laws change how resellers report income tax. There used to be a $20,000 threshold before reporting with a 1099-K. Now it is $600. The number of transactions doesn’t matter if sales exceed $600. This policy starts in 2022, affecting 2023 taxes.
If you buy to resell at a profit, make things to sell, or frequently sell on eBay to profit, you are trading. Notify HMRC. Any profit is taxable. You may owe National Insurance Contributions. Keep records of income and expenses.
Resellers likely owe taxes if earning $400+ annually. Consider write-offs like shipping and fees to save money.
Sales Tax on Reselling
New sales tax rules passed June 2018 require large out-of-state vendors to collect and pay sales tax regardless of nexus. But individual resellers don’t have to collect or pay unless states pass overriding laws and resellers do $100,000+ sales or 200+ transactions in that state per year.
Flipping Houses and Taxes
Flipping houses can generate taxable income. The profit is typically considered active income by the IRS. Investors pay normal income tax rates on the net profit, including federal, state, and self-employment taxes.
There are options to reduce taxes on house flips. Maximizing deductions lowers taxable income. Holding the property over a year gets lower capital gains rates. Living in the home for 2 years allows the primary residence tax exclusion. Consult a tax professional to structure the business to minimize taxes.
The 70% rule helps determine the maximum purchase price. Paying 70% or less of after-repair value sets up better profit potential. Market conditions impact success with the 70% rule too.