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I’m new to the game and I have been listening to the podcast episodes where they talk about going to New York or Chicago and scavenge. I am wondering if expenses on that trip are deducted? I want to develop good habits to document for taxes when I start to make more. I have been tracking mileage in town as I have gone out sourcing at garage sales and thrift stores, etc. I also record everything I purchase in a spreadsheet (I am a spreadsheet nerd!!). I save receipts that I get for purchases. So I guess here are my three main tax questions…
1) I document every cost of every item (like that .25 mug I buy at a garage sale). I don’t have receipts for that stuff but I keep track and want to claim it if I sell the item. Is that risky? How does everyone handle non-receipted items like rummage sales.
2) I believe you can only claim expenses for sold items so how to you handle items you buy in a lot? For some things I have recorded in my spreadsheet just an average cost per item (total cost/number of items). For other things, like game systems with games, (where I know the system is worth what I bought and games are just a bonus) I have said that I spent total amount on the system and record game as $0. Not sure what is the best or proper way to handle for tax purposes? (Again not receipted)
3) Everywhere my boyfriend and I travel we source. We recently drove to Wisconsin from North Carolina to visit family. We hit every thrift store on the way and bought a lot of merchandise. How does everyone handle a double dip trip? i.e. travelling but also working.
Thanks
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We’ve worked it out with our accountant what makes sense. Definitely if we’re driving to thrift stores, we deduct the mileage. If we fly to Chicago to visit family and visit a couple thrift stores, we dont deduct that the flights.
What our account says is: imagine you’re sitting in front of an IRS auditor going over your taxes. Can you explain these deductions confidently?
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Trips can be business and pleasure but as Jay said, there is a limit.
Personally, we take weekend trips to a bigger city that is 3 hours away 4-6 times a year. On these trips I scavenge every day and buy a bunch of inventory. Also on this trip my family comes and we stay in a hotel, go out to eat, go to the zoo, shopping, etc.
Would we go on these trips anyways if I wasn’t ebay selling? Yes. We did this before I was ebay selling.
However, it is still a legitimate business trip now. I have the receipts to prove I was doing legitimate business on this trip because I actually was doing legitimate business. I claim the mileage of the trip as well as the hotel cost. Sometimes I claim my meals (not my families). I would confidently claim these trips in front of an IRS agent.On another front, we take a trip every year to the beach or somewhere else much farther away than 3 hours. The main point of this trip is a vacation – not business. I may occasionally check out a thrift store along the path.
For vacation trips I do not claim the mileage or the hotel. I do claim a few miles here and there if I make a specific short drive trip to go scavenging.
I could very well turn a vacation into a legitimate business trip if I wanted to and claim all of it. But… the point of the vacation is to disengage from work and be with my family. I am happy to not claim those deductions.
The art of the self employed tax game is to make your life deductible. Combine your daily tasks and expenses with your business as much as possible. If you need to grocery shop at walmart, you may also need storage totes and batteries for your business. Now that grocery trip is a business trip you can claim the mileage on. You have a receipt for your supplies to back up the validity of your claim.
Hopefully this helps you.
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