usmsci | 34 Posted May 14, 2021 Author Share Posted May 14, 2021 5 hours ago, Dumars2001 said: First and foremost, a big congratulations to you and the buyer! So, are you going to have to pay that 28% capital gains tax?! That comes to a whopping $63,000 tax hit or was there any way to lower that capital gains tax? anyways, you still made an enormous profit from this sale! Congrats again on the sale! Thanks! 28% is the max for capital gains but you are ultimately taxed on your taxable income bracket. So I will probably make enough this year to be in the 15% tax bracket so it will be about 15% maybe a tad less depending other deductions but thats about right. probably $28k or so. Link to comment Share on other sites More sharing options...
operationivy | 24 Posted May 14, 2021 Share Posted May 14, 2021 Are you certain? I asked my accountant a similar question and he said it adds the profit then checks the bracket for capital gains. Link to comment Share on other sites More sharing options...
usmsci | 34 Posted May 14, 2021 Author Share Posted May 14, 2021 (edited) 2 hours ago, operationivy said: Are you certain? I asked my accountant a similar question and he said it adds the profit then checks the bracket for capital gains. yeah the way it works is that you make $X amount of money. After all deductions you have what is called Taxable Income. If you have capital gains tax to calculate. the first $80k is taxed at 0%. So if you make $200K on game and your taxable income is $50k, $30K will be taxed at 0% and $170K would be taxed at 15%, which would be $25,500. If your Taxable Income is already of $80k then the full amount would be taxed at 15% (200,000 * .15) which is $30,000. thats the way I understand it anyway. Its 28% unless you ordinary tax income bracket is lower. So if you made $1 Million(40% tax income bracket) your rate on the capital gains would be 28%. https://1040return.com/collectibles-tax-collector/ Collectibles tax rate good or bad. The 28 percent capital gain tax on collectibles is the maximum tax rate. For example, if you are in the 15 percent income tax range, your collectible gain is taxed at that rate. If your income tax bracket is higher than 28 percent, the collectibles tax rate is capped at 28 percent. This results in a potentially lower tax rate versus ordinary income taxes. Acutally it looks like I might be in the 12% tax bracket (Married Filing Jointly) with a taxable income less than $81,050, including calculating QBI. https://www.kiplinger.com/taxes/tax-brackets/602222/what-are-the-income-tax-brackets-for-2021-vs-2020 Edited May 14, 2021 by usmsci Link to comment Share on other sites More sharing options...
bergalon | 8 Posted May 19, 2021 Share Posted May 19, 2021 Late to the show, I know but bestine is a nice solvent but isn't for every adhesive. I've had stickers that won't budge with Goo Gone or Bestine and the only thing that works (in my experience) is heat; of course, not an option here. Link to comment Share on other sites More sharing options...
bergalon | 8 Posted May 19, 2021 Share Posted May 19, 2021 On 5/14/2021 at 5:51 PM, usmsci said: yeah the way it works is that you make $X amount of money. After all deductions you have what is called Taxable Income. If you have capital gains tax to calculate. the first $80k is taxed at 0%. So if you make $200K on game and your taxable income is $50k, $30K will be taxed at 0% and $170K would be taxed at 15%, which would be $25,500. If your Taxable Income is already of $80k then the full amount would be taxed at 15% (200,000 * .15) which is $30,000. thats the way I understand it anyway. Its 28% unless you ordinary tax income bracket is lower. So if you made $1 Million(40% tax income bracket) your rate on the capital gains would be 28%. https://1040return.com/collectibles-tax-collector/ Collectibles tax rate good or bad. The 28 percent capital gain tax on collectibles is the maximum tax rate. For example, if you are in the 15 percent income tax range, your collectible gain is taxed at that rate. If your income tax bracket is higher than 28 percent, the collectibles tax rate is capped at 28 percent. This results in a potentially lower tax rate versus ordinary income taxes. Acutally it looks like I might be in the 12% tax bracket (Married Filing Jointly) with a taxable income less than $81,050, including calculating QBI. https://www.kiplinger.com/taxes/tax-brackets/602222/what-are-the-income-tax-brackets-for-2021-vs-2020 My experience (in IL) and for an order of magnitude less sale than yours was this wasn't the case. I did my usual Schedule D and had to pay 28% since I had the item for more than a year. I was able to prove my net profit was a little less than the sale price but that's about it. Hopefully you found a work around (it's painful to pay 28% on a sale but only 15% on grant money!). I have an LLC, but perhaps if you make an s corp you can do something to reduce the rate and pay yourself as an employee type thing. Given the large sum I'd definitely get some professional advice, although maybe stressing out isn't the best way to enjoy a bunch of cardboard becoming worth a house We talked to a few accountants but were still stuck with over 50k in self-employment and capital gains taxes. Congrats again on the sale! Link to comment Share on other sites More sharing options...
usmsci | 34 Posted May 19, 2021 Author Share Posted May 19, 2021 (edited) 10 hours ago, bergalon said: My experience (in IL) and for an order of magnitude less sale than yours was this wasn't the case. I did my usual Schedule D and had to pay 28% since I had the item for more than a year. I was able to prove my net profit was a little less than the sale price but that's about it. Hopefully you found a work around (it's painful to pay 28% on a sale but only 15% on grant money!). I have an LLC, but perhaps if you make an s corp you can do something to reduce the rate and pay yourself as an employee type thing. Given the large sum I'd definitely get some professional advice, although maybe stressing out isn't the best way to enjoy a bunch of cardboard becoming worth a house We talked to a few accountants but were still stuck with over 50k in self-employment and capital gains taxes. Congrats again on the sale! What was your taxable income with the sale ? Even if you count the sale as added to your income that still puts me in the 15% bracket. You may have paid too much. The maximum tax rate is 28%. Thats the difference between capital gains taxes on collectibles and regular capital gains taxes, (which is 20% max) but they both get taxed off of your ordinary income. Maybe @arch_8ngelcan verify. Edited May 20, 2021 by usmsci Link to comment Share on other sites More sharing options...
bergalon | 8 Posted May 20, 2021 Share Posted May 20, 2021 4 hours ago, usmsci said: What was your taxable income with the sale ? Even if you count the sale as added to your income that still puts me in the 15% bracket. You may have paid too much. The maximum tax rate is 28%. Thats the difference between capital gains taxes on collectibles and regular capital gains taxes, (which is 20% max) but they both get taxed off of your ordinary income. Maybe @arch_8ngelcan verify. Maybe but then I want a new accountant It was less than six figures and was about 5 years ago. I'm not sure that the capital gains on collectibles was a graduated tax. I thought it was just 28%..? Our taxes followed: https://www.investopedia.com/articles/personal-finance/061715/how-are-collectibles-taxed.asp I also do some consulting and get paid via a sole proprietorship LLC. Capital gains there are around 15% because it is not profit on an alternative asset. Sucks to pay so much tax without a guaranteed retirement pension or healthcare but that's the US system for you and I could rant at length if you are bored. Link to comment Share on other sites More sharing options...
usmsci | 34 Posted May 20, 2021 Author Share Posted May 20, 2021 (edited) I am 100% self-employed as well but I don’t think that makes a difference. The 28% is a maximum just like regular long term capital gains. (But at 20%, if you make more than 496,600 MFJ). At least that’s what the IRS says. If there is a maximum then there has to be a minimum tax on it. They don't specify directly in the link below however, so I assume it depends on your taxable income. https://www.irs.gov/taxtopics/tc409 Edited May 20, 2021 by usmsci Link to comment Share on other sites More sharing options...
bergalon | 8 Posted May 20, 2021 Share Posted May 20, 2021 1 hour ago, usmsci said: I am 100% self-employed as well but I don’t think that makes a difference. The 28% is a maximum just like regular long term capital gains. (But at 20%, if you make more than 496,600 MFJ). At least that’s what the IRS says. If there is a maximum then there has to be a minimum tax on it. They don't specify directly in the link below however, so I assume it depends on your taxable income. https://www.irs.gov/taxtopics/tc409 Let us know how it goes. My understanding was all gains tax on collectibles was 28%, no graduated rate or anything based on income. Link to comment Share on other sites More sharing options...
final fight cd | 186 Posted May 20, 2021 Share Posted May 20, 2021 (edited) Is anything you sell for money taxed at 28%? I just sold a watch for 11k. This will be taxed for sure, right? Even if I invest a good portion of it? Edited May 20, 2021 by final fight cd Link to comment Share on other sites More sharing options...
usmsci | 34 Posted May 20, 2021 Author Share Posted May 20, 2021 59 minutes ago, bergalon said: Let us know how it goes. My understanding was all gains tax on collectibles was 28%, no graduated rate or anything based on income. OK I will let you know. The key word in that IRS document is maximum. Ive noticed other articles also out there just say you'll pay 28% no matter what. Some others says 28% (or lower depending on ordinary income) which I think is in line with what the IRS says above in their own link. I feel like if it was straight up 28% they would say it, instead inferring that there is a number below maximum that you'll pay on collectibles. Link to comment Share on other sites More sharing options...
operationivy | 24 Posted May 20, 2021 Share Posted May 20, 2021 My accountant (who is extremely well regarded) told me the profits would be 28 percent as well. yes, self employed. No, not some high bracket. Told me no way around it whatsoever. Link to comment Share on other sites More sharing options...
usmsci | 34 Posted May 20, 2021 Author Share Posted May 20, 2021 (edited) 41 minutes ago, operationivy said: My accountant (who is extremely well regarded) told me the profits would be 28 percent as well. yes, self employed. No, not some high bracket. Told me no way around it whatsoever. why does the IRS (on their own link above) say that 28% is a maximum? That means thats the most you will pay on it. Which means that it can be less than that. Its not totally clear, other than some places mentioning taxable income, how much less that can be. Maybe that means its 28% maximum because you are making $3 million for the year you still pay the 28%. I think that was a bit of an oversight when making those rules. If someone who is dirt poor has a windfall of selling something valuable and needs that money to survive on - then thats pretty harsh to take 28% vs someone who is very wealthy to begin with (which this rule targets the wealthy). Edited May 21, 2021 by usmsci Link to comment Share on other sites More sharing options...
bergalon | 8 Posted May 21, 2021 Share Posted May 21, 2021 3 hours ago, usmsci said: why does the IRS (on their own link above) say that 28% is a maximum? That means thats the most you will pay on it. Which means that it can be less than that. Its not totally clear, other than some places mentioning taxable income, how much less that can be. Maybe that means its 28% maximum because you are making $3 million for the year you still pay the 28%. I think that was a bit of an oversight when making those rules. If someone who is dirt poor has a windfall of selling something valuable and needs that money to survive on - then thats pretty harsh to take 28% vs someone who is very wealthy to begin with (which this rule targets the wealthy). I think it's because if you sell it within a year then that will be at your own tax rate, so you could pay less than 28% if you sold that quickly. Link to comment Share on other sites More sharing options...
MiamiSlice | 3,092 Posted May 21, 2021 Share Posted May 21, 2021 12 hours ago, final fight cd said: Is anything you sell for money taxed at 28%? I just sold a watch for 11k. This will be taxed for sure, right? Well yeah it's income. If you can prove that you acquired the watch more than a year ago then you can claim capital gains tax as opposed to regular income tax. 12 hours ago, final fight cd said: Even if I invest a good portion of it? Doesn't matter what you do with the money unless you put it in a pre-tax investment account and I think even for that there is a limit to how much you can put in to avoid paying tax on it but I don't recall what the limit is. Link to comment Share on other sites More sharing options...
usmsci | 34 Posted May 21, 2021 Author Share Posted May 21, 2021 (edited) 14 hours ago, bergalon said: I think it's because if you sell it within a year then that will be at your own tax rate, so you could pay less than 28% if you sold that quickly. no that is specifically for short term capital gains. thats why I am confused as well. I have a free consultation with a local CPA here on Monday. Will let you know. Lets say someone who is dirt poor discovers their great grannies long lost diamond ring and sells it for $50,000 at auction. Now the government wants $14k out of that when that person might need that money for like paying bills or getting out of debt or poverty or something. Thats why it seems strange that the tax would be 28% no matter how poor or rich you are. Reading articles about why they instituted the 28% really points to the wealthy people who naturally innovate, hire people, have businesses, etc. I don't think they ever considered 'normal' people having access to high dollar collectibles. If its not based on taxable income - it should be. Edited May 21, 2021 by usmsci Link to comment Share on other sites More sharing options...
bergalon | 8 Posted May 23, 2021 Share Posted May 23, 2021 On 5/21/2021 at 11:23 AM, usmsci said: no that is specifically for short term capital gains. thats why I am confused as well. I have a free consultation with a local CPA here on Monday. Will let you know. Lets say someone who is dirt poor discovers their great grannies long lost diamond ring and sells it for $50,000 at auction. Now the government wants $14k out of that when that person might need that money for like paying bills or getting out of debt or poverty or something. Thats why it seems strange that the tax would be 28% no matter how poor or rich you are. Reading articles about why they instituted the 28% really points to the wealthy people who naturally innovate, hire people, have businesses, etc. I don't think they ever considered 'normal' people having access to high dollar collectibles. If its not based on taxable income - it should be. My accountant said yup, they will take 28% regardless. Worse still, if you can't show the original purchase price they will assume that all of fair market value is the "gain"; so it would be 28% of that full amount! The examples on investopedia also agree with this. It's just because a 1099K (?) isn't auto-generated by PayPal/ebay (yet) until you go over 20k or so that we have ignored this. Apparently, we should have all been paying 28% on every Nintendo Fiber, POG, and NES cart I'll just claim the "turbo tax didn't have that box" defense in the future. I look forward to hearing what they say! Thanks! Link to comment Share on other sites More sharing options...
Dumars2001 | 164 Posted May 24, 2021 Share Posted May 24, 2021 13 hours ago, bergalon said: My accountant said yup, they will take 28% regardless. Worse still, if you can't show the original purchase price they will assume that all of fair market value is the "gain"; so it would be 28% of that full amount! The examples on investopedia also agree with this. It's just because a 1099K (?) isn't auto-generated by PayPal/ebay (yet) until you go over 20k or so that we have ignored this. Apparently, we should have all been paying 28% on every Nintendo Fiber, POG, and NES cart I'll just claim the "turbo tax didn't have that box" defense in the future. I look forward to hearing what they say! Thanks! Ouch! 28% is a big chunk of money to lose, but at the end of the day, you still made out like a bandit! 1 Link to comment Share on other sites More sharing options...
usmsci | 34 Posted May 24, 2021 Author Share Posted May 24, 2021 (edited) 18 hours ago, bergalon said: My accountant said yup, they will take 28% regardless. Worse still, if you can't show the original purchase price they will assume that all of fair market value is the "gain"; so it would be 28% of that full amount! The examples on investopedia also agree with this. It's just because a 1099K (?) isn't auto-generated by PayPal/ebay (yet) until you go over 20k or so that we have ignored this. Apparently, we should have all been paying 28% on every Nintendo Fiber, POG, and NES cart I'll just claim the "turbo tax didn't have that box" defense in the future. I look forward to hearing what they say! Thanks! another question to ask is, is just because we all sell some special game, does that make the entire video game market a 'collectible' market. Obviously the IRS hasnt specifically outlined that videos game are collectibles but really this insanity has only been going on a few years. With art, rugs, precious metals or whatever has firm foundations of collectibility because of rarity of all those categories. Does a few unique Super Mario Bros games make the entire genre collectible? If thats the case, the IRS could make anything collectible it wants just because someone made a big pay day on one item. Also, theres no way in the world I am going to have a receipt for the game when I bought it on Ebay 20+ years ago. I didnt even think about it because I wasnt planning on reselling it. It was just a hobby to collect a sealed game. The person who sold it to me honestly probably never even considered, just as I did, the rarity of a specific production run. I also bought a bunch of other games that were sealed that probably havent changed value that much since then. Edited May 24, 2021 by usmsci 1 Link to comment Share on other sites More sharing options...
usmsci | 34 Posted May 24, 2021 Author Share Posted May 24, 2021 (edited) 22 hours ago, bergalon said: My accountant said yup, they will take 28% regardless. Worse still, if you can't show the original purchase price they will assume that all of fair market value is the "gain"; so it would be 28% of that full amount! The examples on investopedia also agree with this. It's just because a 1099K (?) isn't auto-generated by PayPal/ebay (yet) until you go over 20k or so that we have ignored this. Apparently, we should have all been paying 28% on every Nintendo Fiber, POG, and NES cart I'll just claim the "turbo tax didn't have that box" defense in the future. I look forward to hearing what they say! Thanks! I talked to a CPA and its clear that its a long term capital gain. The question is, is it a collectible? She wasn't completely sure because theres no, what they call, "long-standing" in the market. After the original Super Marios Bros that sold for $100k two years ago, did that automatically make all other sealed video games collectible? Was that game that sold collectible, just out of the blue? The other thing is, is that we pretty much know how many original Van Goghs or Mona Lisas there are in the world or a particular 1920 Gold coin that was only minted for one year but we don't know the rarity of all video games. Supposedly theres only one sealed 2nd production of Super Mario known (the one on Pawn Stars). What about the others? If everything that people sell, goes for a lot of money, or people buy and trade things online for the purpose of hanging it on their wall or putting it in a showcase then by that definition, everything is collectible and the IRS shouldn't bother with their 'collectible' list. Edited May 24, 2021 by usmsci 1 Link to comment Share on other sites More sharing options...
bergalon | 8 Posted June 1, 2021 Share Posted June 1, 2021 On 5/24/2021 at 1:08 PM, usmsci said: I talked to a CPA and its clear that its a long term capital gain. The question is, is it a collectible? She wasn't completely sure because theres no, what they call, "long-standing" in the market. After the original Super Marios Bros that sold for $100k two years ago, did that automatically make all other sealed video games collectible? Was that game that sold collectible, just out of the blue? The other thing is, is that we pretty much know how many original Van Goghs or Mona Lisas there are in the world or a particular 1920 Gold coin that was only minted for one year but we don't know the rarity of all video games. Supposedly theres only one sealed 2nd production of Super Mario known (the one on Pawn Stars). What about the others? If everything that people sell, goes for a lot of money, or people buy and trade things online for the purpose of hanging it on their wall or putting it in a showcase then by that definition, everything is collectible and the IRS shouldn't bother with their 'collectible' list. Thanks for closing the loop on this! I would love to argue with IRS about their definition of collectible but it may depend on what HA submits more than anything? The amount I had to pay wasn't much compared to your situation (super jealous btw since one of my original goals I had back in '98 or so was a sealed BB set, which I failed totally atl) so it may be worth risking an audit, sending letters, etc. Here's where the vagueness is spelled out in content-less form (408m): https://uscode.house.gov/view.xhtml?req=(title:26 section:408 edition:prelim) OR (granuleid:USC-prelim-title26-section408)&f=treesort&edition=prelim&num=0&jumpTo=true#substructure-location_m Link to comment Share on other sites More sharing options...
usmsci | 34 Posted June 2, 2021 Author Share Posted June 2, 2021 4 hours ago, bergalon said: Thanks for closing the loop on this! I would love to argue with IRS about their definition of collectible but it may depend on what HA submits more than anything? The amount I had to pay wasn't much compared to your situation (super jealous btw since one of my original goals I had back in '98 or so was a sealed BB set, which I failed totally atl) so it may be worth risking an audit, sending letters, etc. Here's where the vagueness is spelled out in content-less form (408m): https://uscode.house.gov/view.xhtml?req=(title:26 section:408 edition:prelim) OR (granuleid:USC-prelim-title26-section408)&f=treesort&edition=prelim&num=0&jumpTo=true#substructure-location_m yeah Comic Connect doesnt send a 1099-K or anything, so it's all on me to report and how. I guess HA does? Link to comment Share on other sites More sharing options...
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