Every dollar you earn on TCGplayer is taxable, whether or not the platform sends you a 1099-K. What you actually owe in TCGplayer taxes depends on how the IRS classifies your selling: a business pays ordinary income tax plus self-employment tax but can deduct costs, a hobby pays tax on gross revenue with no deductions, and a collector selling off investments pays capital gains at a rate as high as 28%. Getting that classification right before you file is the single biggest decision you’ll make.
Business, Hobby, or Investor
The IRS sorts card-selling activity into three buckets, and each one is taxed on a different form at a different rate.
You’re running a business if you sell with a genuine profit motive. A common benchmark is turning a profit in at least three of the last five tax years, which creates a presumption of profit motive. The IRS also weighs how professionally you operate: separate books, time invested, whether you adjust methods to improve results, and whether you rely on the income to live.1Internal Revenue Service. Know the Difference Between a Hobby and a Business No single factor decides it, but the more your store looks like a real operation, the stronger your position.
If the profit motive isn’t there, it’s a hobby. That classification is punishing under current law, which is covered below.
A third category applies if you bought cards primarily as collectibles or investments and sell them occasionally rather than running an ongoing store. Those sales get capital gains treatment. Volume and frequency matter: if you’re moving dozens of cards a week, the IRS is unlikely to accept a passive-investor characterization.
What Business Sellers Owe
Business sellers file Schedule C (Profit or Loss From Business) with Form 1040.2Internal Revenue Service. About Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship) You start with gross receipts, subtract Cost of Goods Sold (what you paid for cards you sold), then subtract operating expenses like TCGplayer fees, shipping, and supplies. The net profit flows to Schedule 1 and gets added to the rest of your income on Form 1040.3Internal Revenue Service. Instructions for Schedule C (Form 1040)
That net profit is taxed at your ordinary federal rate. If it clears $400, you also owe self-employment tax, which catches a lot of sellers off guard.4Internal Revenue Service. Topic No. 554, Self-Employment Tax
Self-Employment Tax
Because you’re self-employed, you pay both halves of Social Security and Medicare yourself. The combined rate is 15.3%: 12.4% for Social Security and 2.9% for Medicare.5Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
The 12.4% Social Security portion stops at the first $184,500 of net earnings in 2026. The 2.9% Medicare portion has no cap.6Social Security Administration. What Is the Current Maximum Amount of Taxable Earnings for Social Security High earners owe an extra 0.9% Medicare tax on self-employment income above $200,000 single or $250,000 married filing jointly.7Internal Revenue Service. Questions and Answers for the Additional Medicare Tax
You calculate the tax on Schedule SE. One partial offset applies: you can deduct half of your self-employment tax when figuring your adjusted gross income, and you get this whether or not you itemize.
The Hobby Trap
If your selling doesn’t qualify as a business, the IRS treats it as a hobby and the result is harsh. You report every dollar of gross revenue as “Other Income” on Schedule 1, Form 1040.1Internal Revenue Service. Know the Difference Between a Hobby and a Business
Hobby expenses are not deductible. The Tax Cuts and Jobs Act suspended miscellaneous itemized deductions starting in 2018, and the One Big Beautiful Bill made that suspension permanent. Platform fees, shipping, and even the price you paid for the cards themselves can’t be subtracted.
A hobby seller who buys a card for $80 and sells it for $100 may owe income tax on the full $100, not the $20 of actual profit. The effective tax rate on real profit can run well over 100%, which is why establishing legitimate business status from day one is worth the paperwork.
The inflated gross income also raises your adjusted gross income, which can shrink education credits, retirement deductions, and other income-sensitive benefits.
Capital Gains if You’re a Collector
If you bought cards as collectibles or investments and sell them occasionally rather than running a store, the sales are capital gains. The IRS specifically classifies trading cards as collectibles.8Internal Revenue Service. Topic No. 409, Capital Gains and Losses
Holding period determines the rate:
- Held over one year: long-term capital gain, taxed at a maximum rate of 28%. That’s higher than the 15% or 20% rate on stocks and most other capital assets.
- Held one year or less: short-term capital gain, taxed as ordinary income.
You report the sales on Form 8949 and the totals flow to Schedule D.9Internal Revenue Service. About Form 8949, Sales and Other Dispositions of Capital Assets Unlike hobby sellers, investors subtract cost basis from sale price and only pay tax on the actual gain. If you sell at a loss, you can deduct up to $3,000 in net capital losses per year against ordinary income ($1,500 if married filing separately), with the excess carrying forward.10Office of the Law Revision Counsel. 26 U.S. Code 1211 – Limitation on Capital Losses
When TCGplayer Sends You a 1099-K
TCGplayer must send Form 1099-K if your gross payments on the platform exceed $20,000 and you completed more than 200 transactions in a calendar year. The One Big Beautiful Bill permanently reinstated this threshold after the IRS had tried to lower it to $600.11Internal Revenue Service. IRS Issues FAQs on Form 1099-K Threshold Under the One, Big, Beautiful Bill; Dollar Limit Reverts to $20,000
Both conditions must be met. $25,000 in sales across 150 transactions doesn’t trigger the form. Some states still enforce lower thresholds, so you may receive a 1099-K for state purposes even when you’re under the federal limits.12Internal Revenue Service. Understanding Your Form 1099-K
Receiving the form doesn’t change whether your income is taxable. It’s always taxable. The form is just an IRS matching document.
Reconciling the 1099-K With Your Actual Income
The gross number on the 1099-K will almost always exceed your taxable income. It reports the total payment amount before fees, refunds, shipping charges collected, or sales tax that TCGplayer collected on buyers’ behalf. The IRS acknowledges these items aren’t your income and expects you to back them out.13Internal Revenue Service. What to Do With Form 1099-K
On Schedule C, enter the 1099-K gross amount as receipts, then deduct fees, refunds, and pass-through sales tax on the appropriate expense lines. The IRS matches the form to your return, so if your gross receipts come in lower than the 1099-K without explanation, expect a notice. Keep records that show the reconciliation.
Deductions That Lower a Business Seller’s Tax
Business status unlocks every ordinary and necessary cost of running the store. These reduce your net profit and, with it, your self-employment tax.
Cost of Goods Sold
Your biggest deduction is almost certainly Cost of Goods Sold: what you paid for the cards you sold during the year. Cost basis includes the purchase price plus costs to prepare the card for sale, such as grading fees.
For high-value singles, specific identification works best: track the exact purchase price for each card and match it to the sale. For bulk inventory, First-In, First-Out is a common alternative. Either way you need documentation. Purchase receipts, bank statements, or marketplace order history all qualify. Without proof of cost basis, the IRS can disallow the entire COGS deduction and tax you on gross receipts.
Platform Fees, Shipping, and Supplies
TCGplayer commission and payment processing fees are fully deductible on Schedule C. So are postage, mailers, toploaders, labels, inventory software, and accounting or tax prep fees. Expenses you pay outside the platform are easier to track if you keep them in a separate account or log.
Home Office
If you use a dedicated area of your home exclusively and regularly as your principal place of business for card sales, you can claim the home office deduction. The simplified method pays $5 per square foot up to 300 square feet, capping at $1,500.14Internal Revenue Service. Simplified Option for Home Office Deduction The regular method deducts a percentage of actual home expenses based on square footage. Either way, the space must be used only for business. A kitchen table that also hosts dinner doesn’t qualify.
Quarterly Estimated Tax Payments
TCGplayer doesn’t withhold income tax or self-employment tax from your payouts. If you expect to owe $1,000 or more in federal tax for the year after any withholding from other jobs, you must make estimated quarterly payments.15Internal Revenue Service. 2026 Form 1040-ES Estimated Tax for Individuals
For the 2026 tax year, payments are due:
- Q1: April 15, 2026
- Q2: June 15, 2026
- Q3: September 15, 2026
- Q4: January 15, 2027
You avoid the underpayment penalty by meeting one of two safe harbors: pay at least 90% of your current year’s tax, or pay 100% of last year’s tax (110% if your prior-year AGI exceeded $150,000). The prior-year safe harbor is simpler when card income is unpredictable.17Internal Revenue Service. Instructions for Form 2210 – Underpayment of Estimated Tax by Individuals, Estates, and Trusts
Underpayment acts like interest on the shortfall. The IRS rate for early 2026 is 7% annually, and it adjusts quarterly.18Internal Revenue Service. Interest Rates Remain the Same for the First Quarter of 2026
Sales Tax Is Handled by TCGplayer
Sales tax is the one piece you can mostly set aside. TCGplayer operates as a marketplace facilitator, calculating the correct sales tax from the buyer’s shipping address, collecting it at checkout, and remitting it to state and local authorities. The platform collects on transactions in all 46 states that impose a sales tax.19TCGplayer. How Do Sales and Income Tax Work for Sellers on TCGplayer For sales made through TCGplayer, you generally don’t need a sales tax permit or returns.
That relief ends outside the platform. If you also sell through your own website, at local shows, or on a platform that isn’t a marketplace facilitator, you may need to register with individual states and file returns yourself. Most states set economic nexus at $100,000 in sales into the state.
One bookkeeping note: the sales tax TCGplayer collected shows up in your 1099-K gross amount but was never your money. Subtract it when entering gross receipts on Schedule C so you don’t pay income tax on pass-through sales tax.
Records to Keep and for How Long
Good records separate a defensible return from an audit headache. Keep purchase receipts for every card or lot, TCGplayer sales reports, shipping receipts, platform fee statements, and documentation for any other business expense.
The IRS requires you to hold records until the statute of limitations closes. For most sellers that’s three years after filing. Underreport income by more than 25% of what you showed, and the window extends to six years. Fail to file at all and there’s no expiration.20Internal Revenue Service. How Long Should I Keep Records
Inventory records need to survive longer than the year you bought them. If you buy a card in 2026 but don’t sell it until 2028, keep the 2026 purchase receipt until at least 2032.
Penalties for Skipping It
The failure-to-file penalty is 5% of unpaid tax per month (or partial month), capped at 25%.21Internal Revenue Service. Failure to File Penalty A separate failure-to-pay penalty of 0.5% per month runs alongside it until the failure-to-file penalty caps out at five months, after which failure-to-pay continues on its own. If your return is more than 60 days late, the minimum penalty is a specified dollar amount or 100% of the unpaid tax, whichever is less.
The IRS matches 1099-Ks to tax returns automatically. If TCGplayer reports $25,000 in payments and nothing corresponding appears on your return, expect a notice and assessment. Filing late with the correct numbers is always better than not filing.