Taxes for card collectors.

Most card collectors don't think about taxes until they sell something meaningful and a 1099-K shows up the following January. By then, the easy decisions have already been made and the only thing left is reconstructing cost basis from memory and old eBay invoices.

The structural rules around card taxation aren't complicated. The IRS treats cards as collectibles — which means a specific capital gains rate, specific reporting thresholds, and a specific set of rules around what you can and can't deduct. Knowing those rules before you sell is straightforwardly cheaper than discovering them on April 14th.

This guide covers the rules that apply to most card collectors in the US. It is not tax advice; we are not tax professionals; the tax code changes; and your specific situation may differ in ways that materially affect the right answer. For meaningful sales, talk to a CPA who has worked with collectible asset clients before. The cost of an hour of their time is cheap relative to the cost of doing it wrong.

Hobby or business?

The most consequential question in trading card taxation is whether the IRS views your activity as a hobby or as a business. The answer changes nearly everything downstream — what you can deduct, what tax rate you pay, what forms you file, and what audit risk you face.

The IRS doesn't make this decision based on what you call yourself. They use a set of factors collectively known as the “profit motive” test — basically, whether your activity is conducted in a businesslike manner with the intent to make money. Casual selling of cards you collected over the years almost always reads as a hobby. Buying inventory with the intent to flip it, maintaining business records, and generating consistent profit reads as a business.

Hobby treatment.Sales are reported as capital gains on Schedule D (and Form 8949 if there's detail). You pay tax on the gain, but you can't deduct losses against ordinary income — only against other capital gains. Hobby losses in excess of hobby gains in a tax year are essentially worthless from a tax standpoint. You also can't deduct hobby-related expenses like grading fees, storage costs, or shipping supplies against your hobby income (this rule changed in 2018 and is currently scheduled to revert in 2026, but always check current guidance).

Business treatment. Income is reported on Schedule C. You can deduct ordinary and necessary business expenses (grading fees, shipping supplies, software, storage, even home office portions if you have a dedicated workspace). You can deduct net losses against your other ordinary income. You pay self-employment tax (15.3%) on net profit in addition to income tax, which makes the effective rate higher than the comparable hobby rate at lower income levels.

How the IRS decides. The nine-factor test in Treasury Regulation 1.183-2 is the formal framework. The factors most often consulted in practice: do you keep business-like records, do you have a separate business bank account, do you advertise or market your sales, have you generated profit in three of the last five years, do you have expertise in the activity, do you depend on the income for your livelihood. No single factor is decisive; the IRS looks at the totality.

For most collectors, the answer is hobby until the activity becomes large and systematic enough that hobby treatment doesn't fit. The threshold is fuzzy. Casual flippers earning a few thousand dollars a year are almost always hobbyists. Sellers running consistent six-figure annual gross revenue from cards are almost always businesses. The middle is where the question becomes interesting and where a CPA consultation is most valuable.

The 1099-K threshold.

Since the threshold changes mostly tightened in 2024-2025, this is the area of card taxation that's gotten meaningfully more relevant for casual sellers. The 1099-K is a tax form that marketplaces (eBay, Whatnot, PayPal, etc.) send both to you and to the IRS reporting your gross sales on the platform during the tax year.

The big change: the federal 1099-K threshold dropped to $600+ for tax year 2026 sales, which means almost any consistent seller of trading cards is going to receive 1099-Ks now. State thresholds can be lower (some states triggered at $600 or even less for multiple tax years before the federal rules caught up). Don't assume the old $20,000 / 200-transactions threshold still applies — it doesn't.

What the 1099-K reports.Gross sales on the platform. Not profit, not net of fees, not net of shipping — gross. If you sold $5,000 of cards on eBay during the year, your 1099-K will say $5,000 even if you paid $4,000 for those cards and netted $200 after fees and shipping. The form is gross sales only.

What you actually owe. You owe tax on net profit, not gross sales. You match the 1099-K on your return, then deduct your cost basis and selling expenses to arrive at the actual taxable gain. The 1099-K starts the conversation; the actual calculation depends on what records you have.

What to do when a 1099-K arrives.File it with your return. If you ignore it, the IRS sees a mismatch between what the marketplace reported and what you filed, and you'll receive a CP2000 notice asking you to explain. Match the gross number on the form, then reduce it to actual gain through your cost basis records. For hobby treatment, this flows to Schedule D. For business treatment, this flows to Schedule C as gross receipts.

What if you sold things at a loss? You still have to report the 1099-K, but you also report the cost basis. If basis exceeds sale price, you have no gain. Hobby losses can offset hobby gains but not ordinary income. Business losses can offset ordinary income (subject to various limitations).

Capital gains rates on collectibles.

This is the rule that most surprises new card sellers. The IRS treats trading cards (along with art, coins, stamps, antiques, gems, and other collectibles) under a separate capital gains regime than stocks and most other investments.

For long-term gains on collectibles — cards you've held for more than one year — the maximum federal rate is 28%, not the 20% maximum that applies to stocks and other long-term capital gains. The actual rate is the lower of 28% or your ordinary income tax rate, so if you're in a lower bracket, you pay your bracket rate. But the ceiling of 28% is the key difference. State income tax applies on top.

For short-term gains on collectibles — cards held less than one year — the rate is your ordinary income tax rate, which tops out at 37% federal in 2026 brackets, plus self-employment tax if business treatment applies. The one-year holding period rule is identical to stocks: you have to hold the asset for more than 365 days from the date of acquisition to qualify for long-term treatment.

The acquisition date is when you bought (or, for cards pulled from packs, when you opened the pack). The sale date is when you sold. Both dates matter for substantiation — the IRS can ask for documentation, and email receipts from eBay, Whatnot, or grading services are usually sufficient.

Card-specific quirk:when you grade a raw card, the “basis” in the slabbed card is the original purchase price plus the grading fee plus shipping. The holding period continues from the original raw purchase date — grading does not reset the clock. This is a small but important nuance.

Cost basis: the silent killer.

Cost basis is the single most important record you keep as a card seller, and the one most often neglected. Your taxable gain is sale price minus cost basis minus expenses. If you don't have documented cost basis, the IRS treats basis as zero — which means you pay tax on the full sale price as if you got the card for free.

For cards bought as individual purchases, cost basis is the purchase price plus any transaction fees you paid. For cards opened from sealed product, cost basis is allocated from the cost of the sealed product across the cards pulled (no, you can't allocate the entire pack cost to your one good pull). For cards received as gifts, basis is generally the donor's basis. For cards inherited, basis is generally the fair market value at the date of death (this is the “step-up” rule and it's extremely favorable to inheritors).

What counts in basis. Purchase price. Sales tax paid at purchase. Shipping paid at purchase. Authentication fees if paid before sale. Grading fees if the grade is captured before sale. Insurance during transit. All of these increase your basis and reduce your eventual taxable gain.

What counts as selling expenses.Marketplace fees (eBay, Whatnot, etc.). Payment processing fees. Shipping you paid as the seller. Packaging materials. Insurance on the outbound shipment. These reduce your taxable gain and don't require being added to basis — they're deducted from sale price.

What doesn't count.Time spent acquiring or selling cards (hobbyists cannot deduct labor; businesses can pay themselves wages but that's its own complex topic). Storage costs for hobby treatment under current rules. General overhead like internet bills or phone bills for hobby treatment.

How to track.A simple spreadsheet works fine for most collectors. One row per card with: card description, acquisition date, acquisition cost (purchase price + sales tax + shipping in), grading cost (if applicable), grading date, sale date, sale price (gross), marketplace fee, shipping out, net proceeds, and gain or loss. Card-tracking software (collectx, Sports Card Investor, etc.) automates a lot of this if you're at scale. The key is starting day one — reconstructing cost basis two years later from incomplete records is much harder than the daily friction of keeping the spreadsheet current.

Records you need to actually keep.

The IRS guidance on collectibles record-keeping is straightforward: keep documentation that lets you substantiate every dollar of cost basis and every dollar of sale proceeds. In practice, this means a few specific things.

Purchase records for every card.eBay invoices, Whatnot order confirmations, receipts from card shops, packet receipts from your local store. Save them as PDFs or screenshots in a dated folder structure. eBay and Whatnot retain transaction history for several years but don't count on platforms keeping records forever — export your own copies.

Sale records for every card. Same idea on the sell side. eBay sale confirmation, Whatnot stream sale confirmation, PayPal transaction history. Anything that documents what you sold for and what fees you paid.

Grading records. PSA, BGS, CGC, SGC, and TAG submission confirmations, with the per-card fees broken out. These get added to basis on the cards being graded. Save the submission email and the return shipping confirmation.

1099-K forms. Marketplaces will send these to you and the IRS in January for the prior tax year. File them with your tax records. If you sold across multiple platforms, you may receive multiple 1099-Ks; all of them flow through to your return.

Inventory snapshots.If you're running business treatment, you need to know your inventory at the start and end of each tax year. A spreadsheet snapshot on December 31 each year captures this. The number doesn't need to be perfect, but it needs to be consistent and defensible.

How long to keep records.The IRS standard recommendation is three years from the date you filed the return that included the sale. For collectibles, we'd recommend longer — seven years — because audits on collectible activity can pull from older periods. Card investors who hold positions for 5-10 years before selling effectively need to keep purchase records that span the entire holding period plus the post-sale audit window.

State tax quirks.

Federal rules are the main story but state rules can move the answer in meaningful ways. A few state-specific things to know:

Sales tax on marketplace transactions.Since the 2018 Wayfair decision, almost every US state requires marketplaces to collect sales tax on transactions where the buyer is in their state. eBay, Whatnot, and similar platforms collect this automatically — you as the seller don't handle sales tax remittance on platform sales. For direct sales (private transactions, in-person sales), you may be responsible for sales tax depending on your state and your activity volume.

State income tax on card gains. Most states tax capital gains at ordinary income rates regardless of federal long-term treatment. So even if your federal rate is 28% on a long-term collectible gain, your state might add another 5-10% on top at ordinary rates. Total combined federal-plus-state rates of 35-40% on long-term card gains are common in higher-tax states.

State 1099-K thresholds.Some states had lower thresholds before the federal change — if you sold meaningfully on platforms before 2024, you may have received state-level 1099-Ks even when federal thresholds didn't trigger. Check your state's current rules; they vary substantially.

Use tax on out-of-state purchases.Technically, when you buy a card from an out-of-state seller and no sales tax is collected, you owe “use tax” to your home state at the same rate as sales tax. Most individuals don't self-report use tax, and enforcement is light, but it's on the books in most states.

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