In today’s dynamic entertainment landscape, event tickets can sometimes serve as more than just a pass to a memorable experience. They can also represent an opportunity for financial gains. However, with profit potential comes the responsibility of understanding the associated tax implications.
Capital Gains from Ticket Resales
When considering capital gains, assets like stocks or real estate might come to mind. Yet, when resold at a profit, event tickets also fall into this category. Profits from ticket resales, particularly when the time between purchase and resale is under a year, are typically considered short-term capital gains. These are subject to taxation at the individual’s marginal tax rate, which mirrors the rate for their ordinary income.
Though the concept of taxing resale profits isn’t novel, it has become increasingly relevant given the growing trend of ticket reselling, powered in part by digital platforms and a connected global audience.
The Evolving Reporting Landscape
One of the most significant changes in recent times is how these resale profits are reported to the Internal Revenue Service (IRS). Under the American Rescue Plan Act of 2021, an expanded reporting requirement exists. Individuals must know that their ticket resales will be reported to the IRS. Subsequently, they will receive a Form 1099-K, which chronicles the sales proceeds.
Previously, only resellers with more than 200 transactions and those raking in sales proceeds exceeding $20,000 annually had to report. The new mandate, however, covers any individual whose sales generate over $600, regardless of the number of transactions.
While this change was earmarked for 2022, its rollout was postponed to 2023, granting the IRS sufficient time for a seamless transition. As we edge closer to this deadline, the onus is on individuals to be vigilant and well-prepared.
Crafting an Effective Tax Strategy
For anyone involved in ticket reselling, it’s essential to have a robust strategy. Here are some steps to consider:
- Understanding Your Tax Basis: This is the foundation. It denotes the initial cost of the tickets. By recording and maintaining this figure, you can easily calculate the profit or loss upon resale.
- Factor in All Associated Costs: Beyond just the ticket price, consider all costs tied to the resale. This includes listing fees, payment processing charges, or shipping costs for physical tickets. Documenting these expenses ensures that you’re only taxed on the genuine net profit.
- Stay Updated on Legislation: Tax laws and regulations can evolve. By staying updated on current legislation and any forthcoming changes, you can strategize effectively and avoid any last-minute surprises.
- Seek Professional Guidance: Given the complexities, seeking advice from tax professionals or financial advisors might be beneficial. They can provide tailored guidance, ensuring you adhere to all requirements and maximize your financial potential.
Navigating the Ticket Reselling Landscape
The world of ticket reselling offers lucrative opportunities. However, it’s crucial to maneuver this space with a comprehensive understanding of the financial implications. At Legacy Private Trust Company, we are dedicated to providing you with the insights and support you need to navigate this evolving landscape. Whether it’s keeping abreast of legislative changes or crafting effective tax strategies, we’re here every step of the way. Join us as we delve deeper into such financial nuances, ensuring you’re always at the forefront of informed decision-making.
If you are a Legacy client and have questions, please do not hesitate to contact your Legacy advisor. If you are not a Legacy client and are interested in learning more about our approach to personalized wealth management, please contact us at 920.967.5020 or connect@lptrust.com.
This newsletter is provided for informational purposes only.
It is not intended as legal, accounting, or financial planning advice.
