Tax Question

[so-flo-kix]

Good evening all, 

I am confused as to how to calculate how much I pay in taxes after deducting the cost of shipping. 

Let's say that I bought an item for $155 and sold that item for $225, and I pay $20 to ship item to the customer. This leaves me with a profit of $50.

Do I pay taxes on the $50 OR do I subtract the $20 shipping from the PROFIT of $50 and pay tax on the remaining $30?

Sorry for the newbie-ish question, I just want to make sure next year when I start selling on Ebay, I send the IRS the correct amount.

[chapeau-noir]

@so-flo-kix  You pay taxes on whatever is left after deducting all of your lawful deductions. I strongly advise getting advice from a tax preparer, or checking out  IRS Tax Tutorial  or a site like Taxjar rather than trying to get advice piecemeal as you know your own tax situation best.  I use Turbotax home and business to file, which is always updated and also guides you through.

[luckythewinner]

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@so-flo-kix wrote:

I am confused as to how to calculate how much I pay in taxes after deducting the cost of shipping. 

Let's say that I bought an item for $155 and sold that item for $225, and I pay $20 to ship item to the customer. This leaves me with a profit of $50.

Do I pay taxes on the $50 OR do I subtract the $20 shipping from the PROFIT of $50 and pay tax on the remaining $30?

Sorry for the newbie-ish question, I just want to make sure next year when I start selling on Ebay, I send the IRS the correct amount.

---

You seem to be under the mistaken impression that you only report your net profit to the IRS. That is a mistaken assumption.

You do not send partial information to the IRS. You report your total income on your tax form, and then you report all the allowed expenses on your tax form. The tax form calcuates your taxable income using these numbers. 

In other words, the IRS is a bit like a high school math teacher. They do not just want to see your final answer  - they want you to "show your work" and prove how you got that answer 🙂

[holidaze1]

you dipped your ship

[holidaze1]

double dipped your ship..

[divwido]

You sold the item for $ 225.  Did the buyer pay $ 20 to ship?  Then you sold the item for $ 245.

And you are forgetting about fees.  A good accounting course never hurt and neither does a visit to a tax preparer who can help you be ready now for the end of the year.  Now is the time to start.

[sin-n-dex]

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@so-flo-kix wrote:

Good evening all, 

I am confused as to how to calculate how much I pay in taxes after deducting the cost of shipping. 

Let's say that I bought an item for $155 and sold that item for $225, and I pay $20 to ship item to the customer. This leaves me with a profit of $50.

Do I pay taxes on the $50 OR do I subtract the $20 shipping from the PROFIT of $50 and pay tax on the remaining $30?

Sorry for the newbie-ish question, I just want to make sure next year when I start selling on Ebay, I send the IRS the correct amount.

---

If you bought for $155 and paid $20 to ship, your cost is $175. You sold for $225. Your profit is $50. You pay taxes on your profit by filing the required forms with the IRS to deduct costs.

I don't know where you think you can subtract $20 from the $50 in profit, you already accounted for that in your original calculation.

C.

[bearswatching]

Hubby retired from Intuit. We use Turbo Tax  with nary an issue. Or, you can spend a lot more for a CPA. Either way. Best to get some professional help.

[nobody*s_perfect]

Take a look at IRS Schedule C and the instructions, to get a better idea of how the IRS looks at it.  

You will report all of the income that buyers paid to you (in your example that's $225), then you deduct all of your expenses which would include the original item cost ($155), shipping expenses ($20), eBay fees, etc.  But as you'll see on Schedule C, you total up each of those expenses and report the annual total, not by individual item that was sold.

[7606dennis]

I recommend that you consult your tax professional.