To minimize tax owed on the sale of items, keep careful records of your total cost for each item. Your taxable gain is the difference between this tax cost and the selling price. If you can’t prove your cost basis, you may owe tax on the item’s entire sale price. Anyway, when you are filing a tax, you must know which federal tax forms you need to fill. The first form to start with is either the 1040, 1040EZ or 1040A, and then the common tax form attachment which is depending on your situation.

All income earned from your hobby is taxable, and it must be reported on your tax return. However, there are rules that must be applied. Gain from the sale of collectibles held for more than one year is subject to a long-term capital gains tax rate. That is tax-favored if your tax bracket is higher than 28%. Expenses incurred while conducting your hobby are deductible up to the amount of income you earn from it. Include these expenses among your miscellaneous itemized expenses. The total is deductible to the extent that it exceeds 2% of your Adjusted Gross Income or ADI. Losses from a hobby are not deductible. This includes losses from the sale of collectibles and losses in the form of expenses that exceed hobby income.