The Short Answer
- The IRS distinguishes hobby collectors from business dealers using 9 specific factors.
- Short-term capital gains on cards held under 1 year are taxed as ordinary income (up to 37%).
- Long-term capital gains on cards held over 1 year max out at 28% for collectibles.
- Hobby expenses are no longer deductible after the 2018 Tax Cuts and Jobs Act.
- All platforms (eBay, Facebook, etc.) now issue 1099-K for sales over $600.
Hobby vs Business: The IRS Test
The IRS uses nine factors to determine whether your card collecting is a hobby or a business. This distinction affects everything from deductible expenses to self-employment taxes.
The 9 IRS Factors
- Profit motive: Do you keep records and try to make a profit? Business dealers maintain spreadsheets; hobbyists buy for enjoyment.
- Expertise: Do you study markets, attend shows, and research prices? Business dealers treat it professionally.
- Time and effort: How many hours per week do you spend buying, selling, and managing inventory?
- Expectation of asset appreciation: Are you buying cards expecting them to increase in value?
- Success in similar activities: Have you made profits in other collectibles or investments?
- History of income/losses: Businesses show profits in 3 of 5 years. Persistent losses suggest a hobby.
- Amount of occasional profits: Large profits on rare sales suggest investment; small consistent profits suggest business.
- Financial status: Does card income supplement a salary, or is it your primary source?
- Personal pleasure: If you collect cards you personally enjoy, the IRS may classify it as a hobby.
Capital Gains Rules for Sports Cards
Sports cards are classified as "collectibles" by the IRS, which means they receive special tax treatment compared to stocks or real estate.
Short-Term Capital Gains (Held Under 1 Year)
If you sell a card within 12 months of buying it, profits are taxed as ordinary income. Your tax rate depends on your total taxable income and can be as high as 37% federally.
| Tax Bracket | Rate |
|---|---|
| Up to $11,925 | 10% |
| $11,926 - $48,350 | 12% |
| $48,351 - $103,350 | 22% |
| $103,351 - $197,300 | 24% |
| $197,301 - $250,525 | 32% |
| Above $250,525 | 35% - 37% |
Long-Term Capital Gains (Held Over 1 Year)
Collectibles held longer than 12 months are taxed at a maximum of 28%, regardless of your income bracket. This is higher than the 20% maximum for stocks but lower than the 37% short-term rate for high earners.
Example: You buy a PSA 10 card for $500 and sell it 18 months later for $2,000. Your $1,500 profit is taxed at your collectibles rate (up to 28%). If you are in the 22% ordinary bracket, you pay 22% on the collectibles gain.
Reporting Requirements in 2026
In 2026, the reporting threshold for payment platforms dropped dramatically. This affects every card seller, even casual ones.
1099-K Threshold: $600
Since 2024, platforms like eBay, PayPal, Facebook Marketplace, and Whatnot must issue a 1099-K if you receive $600 or more in total payments in a calendar year. Previously, the threshold was $20,000 and 200 transactions.
This means if you sell $600 worth of cards on eBay in 2026, eBay sends a 1099-K to you and the IRS. You must report the income on your tax return, even if the sales are at a loss.
How to Report
- Hobby sellers: Report sales on Schedule 1 (Form 1040), Line 8z as "Other Income." You cannot deduct costs, but you report the full sale price.
- Business dealers: Report on Schedule C (Form 1040). You can deduct cost of goods sold, grading fees, shipping supplies, travel to shows, and home office expenses. Net profit is subject to income tax and self-employment tax (15.3%).
Deductions & Expenses
The Tax Cuts and Jobs Act of 2018 eliminated miscellaneous itemized deductions, which means hobby expenses are no longer deductible. This is a major change that affects most collectors.
What Business Dealers CAN Deduct
- Cost of goods sold (what you paid for the cards)
- Grading fees (PSA, BGS, CGC, SGC)
- Shipping supplies (bubble mailers, top loaders, tape)
- Shipping costs (USPS, FedEx, UPS)
- eBay fees and PayPal/credit card processing fees
- Travel to card shows (mileage, hotel, meals at 50%)
- Home office (if exclusively used for the business)
- Subscription services (price guides, market data)
- Equipment (camera, lighting, scanner, computer)
Record Keeping Requirements
The IRS requires receipts for all deductions. Use a spreadsheet or app like Card Ladder to track:
- Purchase date and price for every card
- Sale date, platform, and net proceeds for every sale
- Grading submission receipts with card details
- Shipping receipts and supply receipts
Platform 1099-K Rules by Marketplace
Every major card-selling platform now reports to the IRS. Here is the breakdown:
| Platform | 1099-K Threshold | Notes |
|---|---|---|
| eBay | $600 | Includes all payment methods |
| Facebook Marketplace | $600 | Only if using Facebook Checkout |
| Whatnot | $600 | Streamer and seller payouts |
| PayPal | $600 | Friends & Family excluded |
| Venmo | $600 | Business accounts only |
Cash transactions and in-person sales at card shows are not reported by the buyer. However, the IRS still expects you to report all income. Failing to report cash sales is tax evasion, not tax avoidance.
Frequently Asked Questions
Do I have to pay taxes on sports card sales?
Yes. If you sell cards for a profit, the IRS considers it taxable income. Hobby sellers report sales as "Other Income" on Schedule 1. Business dealers report on Schedule C and can deduct expenses. Even casual sellers who exceed $600 in annual sales will receive a 1099-K and must report.
What is the tax rate on sports card profits?
Short-term gains (held under 1 year) are taxed as ordinary income, ranging from 10% to 37%. Long-term gains (held over 1 year) are taxed at your collectibles rate, capped at 28%. Most states also charge state income tax on profits.
Can I deduct grading fees on my taxes?
Only if you are classified as a business dealer filing Schedule C. Hobby collectors cannot deduct any expenses after the 2018 Tax Cuts and Jobs Act. If you are a dealer, grading fees, shipping costs, eBay fees, and card show travel are all deductible business expenses.
What happens if I do not report card sales?
The IRS receives 1099-K forms from all platforms. If your reported income does not match the 1099-K, the IRS will flag your return. Penalties include failure-to-pay penalties (0.5% per month), interest, and in severe cases, tax evasion charges. The $600 threshold means even small sellers are now visible to the IRS.
Should I form an LLC for card selling?
An LLC provides liability protection and can offer tax flexibility (you can elect S-corp status for savings on self-employment tax). For sellers with $30,000+ in annual profit, an LLC is worth considering. For smaller operations, a sole proprietorship with a separate business bank account is sufficient. Consult a tax professional for your specific situation.
Sources & Further Reading
- IRS Topic 409 - Capital Gains and Losses
- IRS Publication 525 - Taxable and Nontaxable Income
- IRS Form 1099-K FAQs
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