Card sellers fall into three buckets for US tax purposes: business (a dealer who buys to resell), hobby (an activity you do for fun that happens to bring in money), and collector or investor (someone selling cards from a collection they held). Each bucket reports in a different place and gets different deductions. As of 17 October 2026, which bucket you are in turns on profit motive, judged on nine factors in Treas. Reg. §1.183-2(b), with a 3-of-5-years presumption in IRC §183(d).
The three buckets at a glance
| Business (dealer) | Hobby | Collector / investor | |
|---|---|---|---|
| Typical seller | Rips and flips boxes, sells singles weekly on Whatnot or eBay, works card shows | Sells some pulls and duplicates now and then, mainly for fun | Sells cards from a personal collection held for years |
| Where income goes | Schedule C | Schedule 1, line 8j (per Pub 525) | Form 8949 and Schedule D |
| Card cost | Cost of goods sold | Can reduce gross income (Reg. §1.183-1(e)) | Basis of each card sold |
| Other expenses | Deductible (fees, supplies, show tables, mileage) | Not deductible | Not deductible beyond basis and selling costs |
| Losses | Business loss offsets other income | Cannot offset other income | Personal-use losses not deductible |
| Rate notes | SE tax 15.3% from $400 net earnings, plus income tax | Income tax on the line 8j amount | Up to 28% on long-term collectibles gain |
The nine factors, applied to card sellers
The regulation says all facts and circumstances count and no one factor decides it. Here is how each one looks in the hobby:
| Factor (Reg. §1.183-2(b)) | Points toward business | Points toward hobby |
|---|---|---|
| 1. Manner in which you carry on the activity | A ledger with cost basis per card, separate bank account, pricing from sold comps, dropping formats that lose money | No records, cards bought and sold on impulse |
| 2. Your expertise or your advisors’ | You study comps, print runs and grading populations, or consult a tax preparer about the selling | You rely on gut feel |
| 3. Time and effort spent | Regular weekly streams, listing sessions, show weekends | A few listings when you clear out duplicates |
| 4. Expectation that assets will appreciate | You hold sealed product or rookies as inventory you plan to sell higher | You keep cards because you like them |
| 5. Success in other activities | You have built and run other side businesses | No track record |
| 6. History of income or losses | Early losses with a clear plan to turn profitable | Years of losses with no change in approach |
| 7. Amount of occasional profits | Occasional big profits relative to what you put in | Small, rare profits |
| 8. Your financial status | You rely on the income | Large other income and the losses mainly cut your tax |
| 9. Elements of personal pleasure | Fun is present, but the activity is run for money | Ripping is mainly the entertainment |
Enjoying the hobby does not make you a hobbyist. The question is whether you are actually trying to make money and running the activity like it.
The 3-of-5-years presumption
IRC §183(d) helps sellers who turn a profit. If the gross income from an activity exceeds the deductions attributable to it in 3 or more of the 5 consecutive tax years ending with the current year, the activity is presumed to be engaged in for profit unless the IRS shows otherwise. It is not a rule that two losing years make you a hobby; it is a safe harbor for consistent profit. A seller who rips boxes at a loss year after year cannot use it.
Hobby: income in, expenses out
Where the income goes
IRS Publication 525 says income from an activity not for profit goes on Schedule 1 (Form 1040), line 8j, and the Taxpayer Advocate Service repeated that in March 2026.
There is a conflict to know about. The IRS page “What to do with Form 1099-K” (last reviewed 27 July 2026) lists “hobby seller” alongside gig workers and freelancers as sole proprietors who report on Schedule C. That contradicts Pub 525. We have not seen the IRS resolve it, so do not rely on either page alone, and ask a preparer which treatment fits you.
Expenses are not deductible
Hobby expenses fall under the miscellaneous itemized deductions that IRC §67 disallows. That suspension was due to end after 2025; OBBBA §70110 struck the end date, so it is now permanent for tax years beginning after 31 December 2025. Supplies, shipping you pay, show tables and platform fees are not deductible for a hobby seller.
Cost of goods sold may still count
Treas. Reg. §1.183-1(e) says a taxpayer “may determine gross income from any activity by subtracting the cost of goods sold from the gross receipts,” as long as it is done consistently under generally accepted accounting methods. Read plainly, that means a hobby seller who sold $3,000 of cards that cost $2,400 reports $600 of gross income, not $3,000. That is how the regulation reads; the IRS has not said in current guidance that this survives the §67 suspension, though cost of goods sold is part of the gross income calculation rather than a deduction. The cost figure comes from good basis records; see card break cost basis for splitting boxes.
Losses
The IRS says that if you are not trying to make a profit, you cannot use a loss from the activity to offset other income.
Business: dealer inventory on Schedule C
A dealer reports on Schedule C, with the cost of cards sold in Part III (Cost of Goods Sold). Cards held for sale to customers are inventory, and inventory is not a capital asset under IRC §1221(a)(1), which excludes “property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business.” So dealer profit is ordinary income, not collectibles gain, and the 28% rate does not come into it.
A business can deduct its real costs: Whatnot and eBay fees, supplies, postage, show tables, and business mileage at the IRS standard rate (72.5 cents a mile for January to June 2026 and 76 cents from 1 July 2026). Losses are deductible business losses.
Self-employment tax applies once net earnings from self-employment reach $400, at 15.3%, on Schedule SE. For platform-specific detail, see Whatnot taxes.
Collector or investor: capital gains on Form 8949
If you sell cards from a collection you held, each sale is reported on Form 8949, which carries to Schedule D.
- Held one year or less: short-term gain, taxed at ordinary rates.
- Held more than one year: long-term. IRS Topic 409 says net capital gains from selling collectibles “(such as coins or art) are taxed at a maximum 28% rate.”
Trading cards are not named in the statutory collectibles list in IRC §408(m)(2), which covers art, rugs, antiques, metals, gems, stamps, coins, alcoholic beverages and “any other tangible personal property specified by the Secretary.” Treating cards as collectibles at the 28% maximum is common practice, but we could not confirm it from a primary source.
Losses are limited. Topic 409 says losses from the sale of personal-use property are not deductible. Where a collection crosses from personal use into investment is fact-specific. Capital losses that are allowed can offset ordinary income only up to $3,000 a year ($1,500 married filing separately). If a Form 1099-K reports a personal card sold at a loss, the IRS 1099-K page says you can zero it out in the entry space at the top of Schedule 1 or report it on Form 8949; gains and losses are reported separately. More on that in 1099-K for card sellers in 2026.
Mixed sellers: keep the PC separate
Plenty of sellers flip cards and keep a personal collection (PC). Treat them as two pools:
- Tag every card when you get it as inventory or PC.
- Keep PC cards out of the business ledger, with their own purchase records.
- If a PC card later moves to inventory, note the date and its basis at that point.
- Report PC sales separately from business sales.
Mixing them muddies basis, holding periods and the profit-motive picture. In Pullsheet, give PC cards the Personal status in inventory so they stay out of your purchases total; sales of personal cards show on their own line. The tax checklist then asks the hobby, dealer or collector questions from the nine factors and tells you which way your answers lean.
This guide explains the rules; it is not tax advice, so confirm your situation with a tax professional.