Service boundary: Monaco CPA does not monitor holdings, recommend sales, repurchases, or timing, or provide loss-harvesting or investment strategy. Accepted work is limited to return reporting for completed transactions under a separate written scope.
Updated for the One Big Beautiful Bill Act (P.L. 119-21, signed July 4, 2025) - Key 2026 changes: 1099-K restored to more than $20,000 and more than 200 transactions (OBBBA Section 70432), 100% bonus depreciation permanent, Section 179 increased to $2,560,000. NJ still does not conform to federal bonus depreciation or QBI deduction. Last reviewed: July 15, 2026 by Greg Monaco, CPA
In This Article
- The 28% collectible tax rate and why trading cards pay more
- Hobby vs. business: the classification that changes everything
- How to report trading card sales (capital asset vs. inventory)
- 1099-K reporting: what platforms report to the IRS
- Grading decisions and tax implications
- Box breaks: tax treatment
- Card-for-card trades are taxable
- Gifts, inheritance, and other ways to receive cards
- Section 1091 and completed card-loss reporting
- Estate planning for valuable collections
- S-Corp election for card dealers
- NJ-specific rules for card sellers
- Worked dollar example: NJ card dealer tax calculation
- Frequently asked questions
If you sell trading cards - sports cards, Pokemon, Magic: The Gathering, Yu-Gi-Oh!, One Piece TCG, or any collectible card - the IRS considers every sale a taxable event. Whether you're a casual collector selling a few cards on eBay or running a full-time reselling business on Whatnot, there are tax consequences. This guide covers common reporting scenarios.
The 28% Collectible Tax Rate: Why Trading Cards Pay More
Trading cards are generally treated as collectibles under IRC Section 408(m) (opens in a new tab). This matters because long-term capital gains on collectibles are taxed at a maximum rate of 28% - not the standard 0%/15%/20% rates that apply to stocks, real estate, and most other capital assets.
A note on authority: Section 408(m)(2) defines "collectible" by listing works of art, rugs, antiques, metals, gems, stamps, coins, alcoholic beverages, and "any other tangible personal property specified by the Secretary." Trading cards are not expressly named, and neither the IRS nor the courts have squarely ruled on them. Treating cards as collectibles subject to the 28% ceiling is the prevailing practitioner position - it is how most preparers report card gains, and it is the conservative treatment - but it is a return position, not settled law. This guide uses the 28% collectible treatment throughout for planning purposes.
| Asset Type | Long-Term Capital Gains Rate (2025-2026) |
|---|---|
| Stocks, ETFs, real estate | 0% / 15% / 20% (based on income) |
| Collectibles (art, coins, antiques - and trading cards under the prevailing treatment) | 28% maximum |
| Short-term gains (held 1 year or less) | Ordinary income rates (10%-37%) |
The 28% rate is a ceiling, not a flat rate. If your ordinary income tax bracket is below 28% (e.g., the 24% bracket), your collectible gains are taxed at your ordinary rate. The 28% rate only kicks in for taxpayers in the 32% bracket and above.
NJ Treatment: New Jersey taxes all capital gains - including collectibles - as ordinary income at rates from 1.4% to 10.75%. NJ has no preferential capital gains rate for any asset class. There is no special 28% collectible rate for NJ purposes. NJ also does not allow capital loss carryforward - losses can only offset gains within the same tax year.
Hobby vs. Business: The Classification That Changes Everything
The IRS draws a sharp line between hobby collectors and business dealers. The classification determines how you report income, what deductions you can take, and whether you owe self-employment tax.
Hobby Collector (Most Casual Sellers)
- Report: Gains on Form 8949 / Schedule D as capital gains
- Holding period matters: Short-term (held 1 year or less) = ordinary rates; long-term (held > 1 year) = 28% collectible rate
- Losses: Capital losses, limited to $3,000/year against ordinary income with carryforward
- Expenses: NOT deductible (OBBBA made the TCJA suspension of hobby expense deductions permanent under IRC Section 67(g))
- Self-employment tax: None
- NJ: All gains at ordinary income rates; no capital loss carryforward
Business Dealer (Active Resellers)
- Report: Revenue on Schedule C, Line 1; COGS on Line 4; expenses on Lines 8-27
- Holding period: Irrelevant - all inventory sales are ordinary income
- Losses: Fully deductible as business losses (subject to excess business loss limits)
- Expenses: Fully deductible: shipping, packaging, platform fees, travel to card shows, inventory storage, home office. Grading fees follow inventory timing - expensed if the card sells the same year, capitalized to basis if it is still on hand at year-end.
- Self-employment tax: Schedule C profit generally receives the 92.35% Schedule SE adjustment; the resulting net earnings are subject to 12.4% Social Security up to the remaining 2026 wage base of $184,500 and 2.9% Medicare without that cap
- NJ: Category (b) net profits from business; NJ has no separate self-employment tax
The IRS 9-Factor Test (IRC Section 183)
The IRS uses these factors to determine if your card activity is a business or hobby:
- Manner carried on: Do you keep books, track inventory, use accounting software?
- Expertise: Have you studied the market, attended trade shows, developed expertise?
- Time and effort: Is this a significant time commitment?
- Expectation of appreciation: Do you research cards with appreciation potential?
- Success in similar activities: Have you run other successful businesses?
- Income and loss history: Profit in 3 of 5 years creates a presumption of business
- Occasional profits: Even one large profitable year supports business intent
- Financial status: Is this your primary income source?
- Elements of personal pleasure: Personal enjoyment doesn't automatically disqualify business status
Practical threshold: If you're buying and selling cards regularly with the intent to profit, keeping records, and treating it like a business, you're likely a business for tax purposes - even if you also enjoy collecting.
How to Report Trading Card Sales
Capital Asset (Hobby Collector)
- Calculate gain/loss: Sale price - (Purchase price + Grading fees + Shipping paid by you) = Gain/Loss
- Report each sale on Form 8949 (Box C for short-term, Box F for long-term)
- Carry totals to Schedule D
- Description: 'Trading Card - [Card Name] [Year] [Grade if applicable]'
Inventory (Business Dealer)
- Track all purchases as inventory (COGS)
- Report gross revenue on Schedule C, Line 1
- Report COGS on Schedule C, Line 4 (include card purchases, grading fees as part of COGS, shipping supplies)
- Report business expenses on Schedule C Lines 8-27 (platform fees, shipping labels, home office, travel to shows)
- Net profit flows to Schedule SE for self-employment tax
1099-K Reporting: What Platforms Report to the IRS
Under OBBBA Section 70432, the 1099-K reporting threshold is more than $20,000 in gross payments AND more than 200 transactions (permanent, retroactive to TY2022). This applies to:
| Platform | 1099-K Issued? | Threshold | What's Reported |
|---|---|---|---|
| eBay | Yes | more than $20,000 and more than 200 transactions | Gross sales (before fees, returns) |
| Whatnot | Yes (via Stripe) | more than $20,000 and more than 200 transactions | Gross sale amount |
| Mercari | Yes | more than $20,000 and more than 200 transactions | Gross proceeds |
| COMC (Check Out My Cards) | Yes | more than $20,000 and more than 200 transactions | Gross sales |
| Facebook Marketplace | Yes (if using checkout) | more than $20,000 and more than 200 transactions | Gross payments |
| Card shows / cash sales | No | N/A | Self-reported |
Important: The 1099-K reports gross sales - it does not subtract platform fees, shipping, returns, or your cost of goods. Your taxable income is the gross amount minus all legitimate deductions and COGS.
NJ threshold: NJ has its own 1099-K threshold of $1,000 with no transaction minimum (see the NJ Division of Taxation (opens in a new tab)). NJ-based sellers may receive a state-triggered 1099-K even when the federal threshold is not met.
Grading Decisions and Tax Implications
Sending a card to PSA, BGS, CGC, or SGC for grading has tax implications:
- Grading fees are part of your cost basis. They increase your basis and reduce your taxable gain when you sell.
- For business dealers: Grading fees on cards sold during the year are deductible (as COGS or a direct expense). Fees on cards still in inventory at year-end are capitalized to the card's basis and recovered as COGS when the card eventually sells.
- For hobby collectors: Grading fees add to the card's cost basis, reducing capital gains at sale.
- Timing matters: A card graded in 2025 and sold in 2026 - the grading fee becomes part of 2026's gain calculation.
Illustrative Grading-Cost Computation
Assume, only for a completed-sale reporting illustration, a $20 grading fee, a $30 ungraded value, and a $40 graded sale price. The fee adds $20 to basis, and 28% applied to that isolated basis difference is $5.60 before the rest of the return. This is not a recommendation to grade, hold, or sell a card and does not promise a result.
Box Breaks: Tax Treatment
Box breaks - where multiple buyers purchase 'spots' (usually representing specific teams) and a case or box is opened live - create several tax issues:
- Your 'spot' purchase is your cost basis for whatever cards you receive
- Cards received have FMV at the time of receipt - but your cost basis is what you paid for the spot, not the FMV
- If you sell a card from a break: Gain = Sale price - (Spot cost allocated to that card)
- Allocation method: Allocate spot cost across all cards received, pro-rata by FMV at time of break
- Keeping cards: No taxable event until you sell. Your basis is the allocated portion of the spot cost
Box Break Operators
If you run box breaks as a business, the spot purchases from buyers are revenue on Schedule C. Your cost of the product (cases, boxes) is COGS. Platform fees (Whatnot, YouTube), shipping, and equipment are deductible expenses.
Card-for-Card Trades Are Taxable
Every card-for-card trade is a taxable exchange under IRC Section 1001 (opens in a new tab). The 2017 Tax Cuts and Jobs Act eliminated like-kind exchange treatment (Section 1031) for all personal property - including collectibles. Only real property qualifies for 1031 exchanges.
Example: You trade a $500 card (basis $200) for another collector's $500 card. You realize a $300 gain on the trade - even though no cash changed hands. Your basis in the new card is $500 (FMV at time of trade).
Gifts, Inheritance, and Other Ways to Receive Cards
| How Received | Your Basis | Holding Period |
|---|---|---|
| Purchased | Purchase price + fees | Starts at purchase date |
| Gift (FMV > donor's basis) | Donor's basis (carryover) | Donor's holding period tacks |
| Gift (FMV < donor's basis) | Dual basis rule: FMV for loss, donor's basis for gain | Starts at gift date for loss |
| Inherited | FMV at date of death (stepped-up basis) | Automatically long-term |
| Prize / giveaway | FMV at receipt (ordinary income) | Starts at receipt date |
| Box break | Allocated spot cost | Starts at break date |
Section 1091 and Completed Card-Loss Reporting
For completed trading-card transactions, IRC Section 1091 does not itself impose the stock wash-sale disallowance because the statute applies to stock or securities.
IRC Section 1091 (opens in a new tab) applies only to stock or securities. Reporting a completed card-loss sale and any separate acquisition requires these facts:
- The completed sale date, proceeds, substantiated basis, and holding period
- Any separate acquisition date and price, which generally start a new basis and holding period
- Whether personal-use, related-party, economic-substance, or capital-loss rules limit the realized loss
A later acquisition does not cause disallowance solely under Section 1091, but that fact does not establish deductibility or a universal legality conclusion. Monaco CPA does not identify cards to sell or recommend a sale, repurchase, or transaction date.
Estate Planning for Valuable Collections
High-value card collections deserve estate planning attention:
- Stepped-up basis at death (IRC Section 1014 (opens in a new tab)): Heirs receive cards at FMV on the date of death, eliminating all unrealized gains
- NJ Inheritance Tax: Class A beneficiaries (spouse, children) are exempt. Class C (siblings) pay 11-16% above $25,000 exemption. Class D (friends, non-relatives): a beneficiary share below $500 owes no tax, but once a share reaches $500 the entire share is taxable - 15% through $700,000 and 16% on the excess (NJ rate table (opens in a new tab))
- Qualified appraisals: Required for donations of collectibles valued at $5,000+ (Form 8283 Section B)
- Insurance documentation: Maintain current appraisals for insurance and estate purposes
Monaco CPA does not provide estate planning or estate-accounting services. Collection owners should take transfer-at-death and document-structure questions to an independent estate-planning attorney and tax professional whose practice covers that work.
S-Corp Election for Card Dealers
There is no universal profit threshold at which an S-Corp election benefits a card dealer. As an isolated payroll-tax illustration with no other wages, $150,000 of Schedule C profit produces about $21,194 of regular SE tax, while a $70,000 reasonable salary produces $10,710 of combined employee-and-employer FICA - a $10,484 gross payroll-tax difference, not net savings. A full-return model must include reasonable compensation, QBI, retirement contributions, unemployment taxes, employer deductions, NJ taxes and BAIT if applicable, compliance costs, and other wages. P.L. 2022, c.133 generally eliminated the old separate CBT-2553 for qualifying federal approval/effective dates and privilege periods, but DORES 1120-filer registration, federal approval proof, Shareholder Jurisdictional Consent, and timely CBT-100S filing still apply. Formation date is not the test; earlier privilege periods may require retroactive-election review. See the S-Corp calculator for a starting model.
NJ-Specific Rules for Card Sellers
- NJ GIT: All gains taxed at ordinary income rates (1.4%-10.75%). No preferential collectible rate
- No capital loss carryforward: Losses only offset gains in the same tax year. Excess losses disappear for NJ
- NJ estimated tax: Required if NJ tax owed exceeds $400. Safe harbor: 80% current year or 100% prior year (110% if prior-year gross income exceeds $150,000 per N.J.S.A. 54A:9-6(d)(3))
- NJ sales tax: NJ exempts casual or occasional sales from sales tax. Regular sellers may need to collect NJ's 6.625% sales tax
- NJ Section 179: $25,000 cap (vs. $2,560,000 federal). NJ does not allow bonus depreciation
Worked Example: NJ Card Dealer Tax Calculation
Meet Kevin, a NJ resident who runs a trading card reselling business on eBay and Whatnot while working a full-time job earning $95,000.
Kevin's 2025 Card Activity
| Item | Amount |
|---|---|
| Gross card sales (eBay + Whatnot) | $82,000 |
| Cost of cards purchased (COGS) | $51,000 |
| Grading fees (PSA Value submissions) | $3,300 |
| Platform fees (eBay 13.25%, Whatnot 8%) | $8,600 |
| Shipping supplies and labels | $2,400 |
| Home office (simplified, 100 sq ft x $5) | $500 |
| Card show travel and table fees | $1,800 |
| Net Schedule C profit | $14,400 |
Home-office note: The simplified method is $5 per square foot of qualifying home-office space, capped at 300 square feet (IRS simplified option (opens in a new tab)). 100 square feet therefore yields $500, not $1,500 - the $1,500 figure is the maximum deduction at the full 300-square-foot cap.
Federal Return
| Line | Amount |
|---|---|
| W-2 wages | $95,000 |
| Schedule C net profit | $14,400 |
| Total income | $109,400 |
| Deductible half of SE tax | ($1,017) |
| Standard deduction | ($15,750) |
| QBI deduction (20% of $13,383, net of 1/2 SE tax) | ($2,677) |
| Taxable income | $89,956 |
| Federal income tax | ~$14,704 |
| SE tax on $14,400 (15.3% x 92.35%) | $2,035 |
| Total federal tax | ~$16,739 |
NJ Return
| Line | Amount |
|---|---|
| W-2 wages (NJ-1040 Line 15) | $95,000 |
| Net business profits (Line 18) | $14,400 |
| NJ gross income | $109,400 |
| NJ personal exemption (single, under 65; assumed) | ($1,000) |
| NJ taxable income | $108,400 |
| NJ GIT | ~$4,779 |
Without Proper Documentation
If Kevin failed to track his COGS, grading fees, and business expenses, his $82,000 1099-K gross would not substantiate the offsets claimed on Schedule C. The resulting adjustment could increase income tax, SE tax, and NJ tax; the amount cannot be computed by multiplying the unsupported deductions by one marginal rate because the Schedule SE adjustment, Social Security wage-base interaction, QBI, and progressive brackets all change. Proper records establish the COGS and expenses rather than promising a fixed dollar saving.
2026 Comparison: 1099-K Threshold Change
Under the OBBBA (Section 70432), the 1099-K threshold is permanently restored to more than $20,000 and more than 200 transactions. Kevin's $82,000 in sales still triggers 1099-K reporting. But a smaller seller with $15,000 in gross sales and 150 transactions would NOT receive a 1099-K in 2026 - compared to the prior $600 threshold that would have triggered one. The income is still taxable regardless, but fewer sellers will face the IRS matching problem.
Frequently Asked Questions
Do I have to report card sales under $600?
Yes. All income is taxable under IRC Section 61 regardless of whether you receive a 1099-K or any other form. The threshold of more than $20,000 and more than 200 transactions only determines when the platform must file the form, not when you owe tax.
Are Pokemon cards taxed differently than sports cards?
No. All trading cards - sports, Pokemon, Magic: The Gathering, Yu-Gi-Oh!, One Piece - receive the same treatment: they are generally reported as collectibles subject to the 28% maximum long-term capital gains rate. (Section 408(m) does not expressly name trading cards; see the authority note earlier in this guide.)
Can I deduct the cost of cards I keep in my personal collection?
No. Cards retained for personal use are not deductible. Only cards sold or used as business inventory create deductions. If you purchase a $500 card and keep it, there is no tax event until you sell it.
How do I value cards with no clear market price?
Use comparable recent sales from eBay completed listings, Fanatics Collect (formerly PWCC Marketplace), or 130point.com. For graded cards, PSA and BGS population reports help establish rarity-adjusted FMV. Document your valuation methodology.
I bought a card years ago and don't remember what I paid. What's my basis?
You must reconstruct and substantiate your basis from records: old eBay purchase history, credit card statements, or contemporaneous price guides from the approximate purchase year. An unsupported estimate is not acceptable substantiation, and unsubstantiated basis risks being treated as zero if the IRS examines the return. If you cannot reconstruct basis from any records, consult a CPA before filing, because reporting basis too high risks penalties if challenged.
Do I need to charge sales tax on card sales?
It depends on your state and volume. NJ exempts casual/occasional sales. If you sell regularly and meet economic nexus thresholds ($100,000 OR 200+ transactions in NJ), you likely need to register, collect, and remit NJ sales tax at 6.625%.
Where can I get help with trading card taxes?
I'm a NJ-licensed CPA with experience in return reporting for completed collectible transactions, the 28% ceiling, hobby-versus-business classification, and multi-platform 1099-K reconciliation. Use the contact form to request an intake review. Accepted work requires a separate written scope and does not include holdings monitoring, trade recommendations, timing advice, or loss-harvesting strategy.
Reporting Completed Trading-Card Transactions
Completed card-sale reporting depends on substantiated basis, grading fees, platform fees, holding period, classification, and the applicable collectible-rate ceiling. I'm Greg Monaco, a NJ-licensed CPA. Greg is the sole practitioner and personally reviews, approves, and signs accepted client-facing work. Monaco CPA does not recommend trades or promise a tax result.
Use the contact form to request an intake review
Related Articles
Related reading: Reseller Taxes | Whatnot Seller Taxes
Circular 230 Disclosure: This content is for informational purposes only and does not constitute tax advice. Written tax advice from a Circular 230 practitioner is governed by 31 C.F.R. §10.37; Treasury’s 2014 final regulations eliminated the former “covered opinion” rules and their mandatory disclaimer legend, so no such legend appears here. Tax laws change frequently; consult a licensed CPA about your specific facts.