Every Pokemon collector who has sold more than a few hundred dollars of cards on eBay in the last two years has had the same uneasy moment - what do I actually owe the IRS, and is the 1099-K I just got going to ruin my tax return? The short answer is that the rules changed twice in three years, and most of the panic-driven internet posts are working off outdated info.
Here is what US Pokemon card sellers actually need to know for tax year 2025 (filed in 2026) and going forward: the new 1099-K thresholds, the 28 percent collectibles capital gains rate that catches a lot of people off guard, the hobby-versus-business distinction that changes everything, and the cost-basis records you should be keeping today.
Key Takeaways
- The 1099-K threshold for 2025 (filed early 2026) reverted to $20,000 in gross payments AND 200 transactions under the One Big Beautiful Bill, per the IRS.
- The 1099-K is a reporting trigger, not a tax trigger - income is taxable whether or not you receive the form.
- Long-term capital gains on collectibles (held over 1 year) are taxed at a maximum 28 percent rate, higher than the 15 to 20 percent on stocks.
- Short-term gains (held under 1 year) are taxed at ordinary income rates, typically 22 to 32 percent for most US adults.
- You owe tax on the gain (sale price minus cost basis minus fees), not the gross sale amount - cost-basis records are critical.
- The hobby-versus-business distinction changes what deductions you can take and how losses are treated - get this classification right.
The 2026 1099-K Threshold (And Why the Confusion)
The 1099-K reporting threshold has whiplashed three times in three years. Under the American Rescue Plan, it was scheduled to drop from $20,000 to $600 starting in 2022. The IRS delayed the change. It was supposed to phase down through $5,000 (2024), $2,500 (2025), $600 (2026). Then the One Big Beautiful Bill reset the threshold back to its original $20,000 and 200 transactions.
According to the IRS guidance issued in early 2026, payment platforms like eBay, PayPal, and Venmo are not required to issue a 1099-K unless your gross payments exceed $20,000 AND you have more than 200 transactions on that platform within the year.
Important nuance: some platforms still send 1099-Ks below the federal threshold because of state-level requirements. California, Maryland, Massachusetts, Vermont, and Virginia all have lower state thresholds. If you live in one of those states and sell over the state threshold, expect a 1099-K even if you did not hit federal limits.
The Critical Distinction: Reporting vs Owing
This is the part most internet panic posts get wrong. The 1099-K does not determine what you owe. It determines whether the IRS gets a copy of your sales data. Per the IRS, all income is taxable unless a specific exception applies - and the 1099-K threshold is not an exception.
Practical version: even if you sell $3,000 in Pokemon cards on eBay this year and never receive a 1099-K, you still owe tax on any gain. The form is paperwork. The tax is owed either way.
The 28% Collectibles Rate That Catches People Off Guard
Most people know the basic stock-market tax structure: short-term gains taxed as ordinary income, long-term gains (over 1 year) taxed at preferential rates of 0, 15, or 20 percent depending on your bracket. Trading cards do not get the preferential rate. They get the collectibles rate, which caps at 28 percent.
Per IRS regulations, "collectibles" include works of art, rugs, antiques, metals, gems, stamps, coins, and - importantly for our purposes - "any other tangible personal property that the IRS determines is a collectible." Trading cards have consistently been treated as collectibles by the IRS for capital gains purposes.
| Holding Period | Tax Treatment | Typical Rate (US Adults) |
|---|---|---|
| Held under 1 year (short-term) | Ordinary income | 22% to 32% federal, plus state |
| Held over 1 year (long-term) | Collectibles capital gains | Maximum 28% federal, plus state |
| Held over 1 year, low income | Collectibles capital gains | Lower of 28% or your ordinary rate |
The 28 percent rate is the cap. If your ordinary income tax bracket is below 28 percent, you pay your ordinary rate. The 28 percent only kicks in for higher-income filers. But it is the ceiling - long-term collectibles gains never get the 15 or 20 percent preferential rate that stocks get.
You Owe Tax on the Gain, Not the Gross Sale
This is the most important sentence in this article. The taxable amount is the gain, calculated as:
Gain = Sale Price - Cost Basis - Selling Fees
Example. You sell a card for $400 that you bought for $300 two years ago. eBay takes a $53 fee (13.25%). Your gain is $400 - $300 - $53 = $47. You owe tax on the $47, not the $400. If you have held the card over a year, you pay collectibles capital gains on the $47 - at the 28 percent cap that is $13 in federal tax.
This is why cost-basis records matter so much. If you cannot prove what you paid for a card, the IRS can treat the entire sale price as gain. A $400 sale could become $400 of taxable income instead of $47.
The Hobby vs Business Distinction
Whether the IRS views your Pokemon card selling as a hobby or a business changes the entire tax treatment. The IRS uses 9 factors to determine business intent (regularity of activity, profit motive, expertise, time invested, expectation of appreciation, prior success, history of income, profit pattern, personal pleasure).
Hobby Classification
- Income reported on Schedule 1 as other income
- No deductions allowed for expenses (since 2018 tax reform)
- Losses cannot offset other income
- Cleaner if you sell occasionally for fun
Business Classification
- Income reported on Schedule C
- Expenses fully deductible (cost of goods, fees, supplies, mileage, home office)
- Losses can offset other income
- Subject to self-employment tax (15.3% on net profit)
- Better if you sell regularly with clear profit motive
For most casual collectors selling under $5,000 a year, hobby classification is the default and the right answer. For sellers running consistent activity over $20,000 a year with documented profit motive, business classification often nets less total tax even with self-employment tax included.
Cost-Basis Records You Should Be Keeping Today
Whether or not you sell this year, start tracking now. The records that protect your tax position:
- Purchase receipts - keep email confirmations, eBay purchase history, TCGplayer order history, card shop receipts
- For booster boxes / packs - allocate the box cost across the cards pulled (a $150 ETB pulling 36 valuable cards has a $4.17 cost basis per card)
- For gifts - the cost basis transfers from the giver if they bought it new; if you inherited, basis steps up to fair market value at date of inheritance
- Grading fees - these add to your cost basis ($25 PSA economy fee becomes part of your basis for that card)
- Storage and supply costs - if business, deductible; if hobby, not deductible but should still be tracked
Keep records for at least 7 years from the year of sale, since the IRS has a 3-year statute of limitations on most audits but 6 years for substantial under-reporting.
State Tax Layered On Top
State capital gains rates vary widely. Florida, Texas, Nevada, Washington, Wyoming, South Dakota, and Tennessee have no state income tax. California taxes capital gains at up to 13.3 percent on top of federal. New York, Hawaii, Oregon, and Minnesota all stack 9-10 percent state rates on collectibles gains.
The combined federal-plus-state hit on a $10,000 long-term collectibles gain in California can reach 41 percent. In Florida it sits at 28 percent. The state delta is real money on any meaningful sale.
Frequently Asked Questions
Do I need to report Pokemon card sales if I'm under the $20,000 1099-K threshold?
Yes. The 1099-K is a reporting form sent to the IRS by payment platforms. Your obligation to report income is independent of whether the platform reports it. All income is taxable unless an exception applies, regardless of the 1099-K threshold.
What if I sold cards at a loss?
Hobby losses cannot offset other income on your tax return - this changed in the 2018 Tax Cuts and Jobs Act. Business losses (Schedule C) can offset ordinary income. If you have a hobby loss, you cannot deduct it. If you have a business loss and meet the IRS's business-intent factors, you can.
How do I prove cost basis for cards I bought years ago without receipts?
Reconstruct as best you can. Pull eBay purchase history (goes back many years), credit card statements, PayPal transaction history, TCGplayer order history. For cards bought in person at card shops or shows, document with a written record of what you remember paying. The IRS accepts reasonable estimates with supporting documentation.
Are crypto-purchased cards taxed differently?
The crypto purchase creates a separate taxable event (capital gain or loss on the crypto used). The card purchase happens at the fair market value of the crypto on the purchase date. When you sell the card, your basis is that fair market value. Yes, this gets messy.
Should I form an LLC for my Pokemon card selling?
For most casual sellers, no - it adds complexity and annual filing fees without changing federal tax treatment for a single-member LLC. For high-volume sellers running clear business activity, an LLC can provide liability protection but the tax benefit is limited unless you elect S-corp status (which has its own rules).
What records do I need for an audit?
Sale records (eBay sold history, TCGplayer sales reports), cost-basis records (purchase receipts, allocated booster-pack costs), fee records (platform statements), shipping records, and any business expense documentation if you claim business status. Save everything in a dedicated folder organized by tax year.
Is this advice from an accountant?
No. This article is collector-to-collector information based on public IRS guidance. Tax law is complex, individual situations vary, and the IRS rules change. Consult a tax professional for your specific situation - this is informational only and not tax advice.
Your Next Step
Spend 30 minutes this week starting a cost-basis spreadsheet for your top 20 cards by value. Pull purchase prices, dates, and source platforms. That single spreadsheet protects you on any future sale and forces clarity about what your collection actually cost versus what it is currently worth.
For broader exit planning context, see our pillar on when to sell your Pokemon master set and the deep-dive on reading TCG market cycles in 2026. For platform-by-platform fee math, see whole-set vs individual card selling.
The cards you keep through tax cycles deserve binders built for the long hold. Browse our archival-grade collection.
Sources
- Internal Revenue Service, Understanding your Form 1099-K, retrieved 2026-05-22, irs.gov
- Internal Revenue Service, FAQs on Form 1099-K threshold under One Big Beautiful Bill, retrieved 2026-05-22, irs.gov
- Internal Revenue Service, Form 1099-K FAQs General Information, retrieved 2026-05-22, irs.gov
- Kiplinger, IRS 1099-K Threshold Change Coverage, retrieved 2026-05-22, kiplinger.com
