The IRS delays the $600 eBay/Paypal taxation limit...

[ArmyDoc]

Depends on what numbers you pick and how you define income. For sure the top 1% do pay a higher rate of income tax (26% vs. 20 odd % for the bottom 50%) and overall they pay more in tax, but their effective tax rate is far lower as they gain much less of their income from sources subject to income tax. Warren Buffett's total tax rate is less than 1%, which appears to be about par for the course for his peers.

There are three types of high income people - people with income that comes from a salary, people whose income that comes from their business and income that comes from capital gains. I would venture to guess that high income salaried people out number the other two combined.

Top 10% make $190k+ Salaried actual Percent paid = ~20% of the first ~180k, plus 32% of that above 180k
Top 5% make $290k + Salaried actual percentage paid = ~23% of first 231k, plus 35% of that above 231k
Top 1% makes $865+ Salaried actual percentage paid = ~30% of first 578k, plus 37% of that above 578k

This is for individuals... its different for married, and it doesn't count state taxes.

If your are a business man, with a pass through business, you can write off a lot of expenses salaried individuals pay for as a business expense before you pay your salary, thus taking a "lower salary" and paying ower income taxes, but the brackets are the same for what you do pass through.

Those individuals making the majority of their income from capital gains, they pay nothing on the first $44k, 15% on the next ~450k and 20% above that.
So a top 1% pays about 13.6% on the first $490k, and 20% on anything above that.

So, if they are reporting that income, top 1% people are going to be paying at least 16%. I'm told there are a lot of ways they can hide / shift their income to different years etc. But I wouldn't know about that - I've never made that kind of money in capital gains.

 

[ArmyDoc]

If you start trying to claim that you sold something at a loss I think you would also have to start calculating depreciation which is a pain the A.

I think you only have to depreciate it if you are writing it off of your taxes along the way, but I don't know. Probably would need to talk to an accountant before trying anything like that. Still think it they are going to tax me on the money I earn, and tax me on what I buy (sales tax), they shouldn't tax me a third time if I sell the thing.

 

[Nesse1]

Do any of you guys know what's involved with taxes related to a "hobby business." Before the $600 thing was postponed, I was thinking that a hobby business disclosure may be my best bet. Reason being, one of my hobbies is buying up older motorcycle carburetor cores, restoring them, and then flipping on ebay. I've got money tied up in the process, so the selling price is NOT pure profit. If the $5k limit for next year holds true, this question is moot, but I'd still like to understand if this would be an option for when I retire next year...

 

[Ischgl99]

I am one of those nuts that believes it will be here in our lifetime. I think European Union will adopt it first. Say in 3-5 years. First on a voluntary “” basis. Say all governmental transactions at first. Then to everything. Most likely they will tell you that they will not get rid of cash. You will have a choice. But will soon after eliminate it. Costs too much to print or some other lame excuse.

Not at all a good thing for humanity.

Perfect time to increase our machining skills in order to barter for things.


Cutting oil is my blood.

Exactly my thoughts, but I think it might come sooner than that. The economy is crashing and that is a good time to introduce it when people are desperate.

 

[twhite]

Exactly my thoughts, but I think it might come sooner than that. The economy is crashing and that is a good time to introduce it when people are desperate.

Very well could be. We shall see sooner than later I believe. All about total control of the populace. Look no further than China as the ultimate goal. JMO


Cutting oil is my blood.

 

[Beckerkumm]

Buffett's 1% rate is based on including the unrealized appreciation of his investments. Those will eventually be taxed unless as in Warren's case, they will go to charity. Pensions are 401(k)) are taxed at higher rates than dividends or capital gains because they were tax deferred. Those investments earned additional income due their deferred nature so the penalty on the back end is to compensate. There have been proposal's to tax unrealized gains but given market fluctuations and the difficulty in valuing non public assets, I hope it never becomes law. It would have a devastating impact on small business if the capital needed to grow or maintain the business was diverted to additional tax on the basis of a government agent determining value.

The sale of personal use items never results in a taxable loss but can result in a taxable gain.

Dave - bean counter for 50 years.

 

[Ischgl99]

Do any of you guys know what's involved with taxes related to a "hobby business." Before the $600 thing was postponed, I was thinking that a hobby business disclosure may be my best bet. Reason being, one of my hobbies is buying up older motorcycle carburetor cores, restoring them, and then flipping on ebay. I've got money tied up in the process, so the selling price is NOT pure profit. If the $5k limit for next year holds true, this question is moot, but I'd still like to understand if this would be an option for when I retire next year...

If you generate any income from it, you are required to report it in either case. This article can help you decide which way to go, but in a nutshell, you can’t deduct expenses if it’s considered a hobby, only if run as a business intent on making a profit.

Hobby Income: What It Is and How It’s Taxed

Hobby income isn’t subject to self-employment tax, but will the IRS consider your hobby a business?

www.kiplinger.com

 

[rwm]

I think one point here was not made entirely clear. If you are selling your personal things on eBay and you are not making a profit on them, there is no tax consequence for you under this rule.

 

[twhite]

I think one point here was not made entirely clear. If you are selling your personal things on eBay and you are not making a profit on them, there is no tax consequence for you under this rule.

Interesting how does one prove it to the IRS? Does EBay distinguish between this type of sale? If so how do they determine that?


Cutting oil is my blood.

 

[Ischgl99]

Interesting how does one prove it to the IRS? Does EBay distinguish between this type of sale? If so how do they determine that?


Cutting oil is my blood.

It’s up to you to declare that on your tax return, and keep documentation of what you paid for it, in case you get audited. The IRS can say your cost basis is zero if you can’t prove what you paid for it, or have a close enough comparison to make you claim credible.

This article explains it very well.

eBay Seller Tax FAQs and Unique Scenarios Explained | TaxAct

TaxAct has partnered with eBay to explain tax issues related to selling products online. Learn about unique situations such as selling inherited items.

www.taxact.com

I want to point out, the only new part with this is the reporting the IRS will now be getting at the lower levels with these 1099s, we were always required to report net income of anything we sell, regardless of how we sold it.