I made a profit when I sold concert tickets last year. Do I need to report this on my tax return?

By Andrew Keshner

Last year was busy for live music: Taylor Swift, Beyonce, Morgan Wallen, Ed Sheeran and BLACKPINK all had blockbuster concerts

Dear Tax Guy,

I'll keep it short and sweet. Do I have to put concert ticket resales on my Schedule D when filing my income-tax return? I made a profit when I resold them.

Whistling "Taxman" by The Beatles

Dear Whistling,

To quote a lyric from that song: "Let me tell you how it will be."

First came the live event. Now comes the possible tax event. Yes, you should report the ticket resale on your income-tax return through a Schedule D (Form 1040). You just might not need to pay taxes on it.

But if you do face some taxes on it, in a time - dare I say an era - of fees, those added costs could actually help you trim some of the tax.

Last year was a great one for live music: Taylor Swift, Beyonce, Morgan Wallen, Ed Sheeran, BLACKPINK and on and on. I vividly recall a Bruce Springsteen concert at MetLife Stadium last August. (And yes, I just involuntarily said "Bruuuuuce!")I assume questions on ticket resales will only become more common.

So turn up the Beatles' "Taxman" and read on.

Capital gains and Schedule D

The Schedule D is needed to report a capital gain or loss on your income taxes. Another necessity is the Form 8949, which lists the sales and dispositions summarized in the Schedule D. (If someone makes ticket resales their business, they'd be submitting a Schedule C on business income and losses, she noted.)

It's also easy to think of capital gains as having a preferential tax rate. Yet those rates of 0%, 15% and 20% only apply if it's been at least a year since the asset was acquired. When the resale is within a year, the proceeds are treated as ordinary income. So the taxman lumps it with wages, bank-account interest and other money.

A ticket's fees also are part of the cost in addition to its face value, said Nicole DeRosa, partner at Wiss, an accounting and consulting firm with offices in New York, New Jersey and Florida. That would push up the cost-basis and shrink the taxable profit.

The sale at the personal loss should also be included on the Schedule D and Form 8949, but it would reflect a disallowed personal loss, she noted. In other words, the tax code can't help you if you lost money when unloading a ticket because your friend bailed at the last minute.

Form 1099-K

Third-party payment platforms like PayPal (PYPL), Venmo and Stubhub are also required to send the 1099-K tax form to people receiving the payment in exchange for goods and services.

The general threshold to activate a form is currently $20,000 and more than 200 transactions. The form was supposed to kick in with at least one payment worth $600. But last year the Internal Revenue Service decided it would hold off on the threshold. It was the agency's second year pausing implementation, and avoiding potential taxpayer confusion is one reason for doing so. In 2024, the reporting threshold drops to $5,000.

I thought it was tricky leaving the MetLife Stadium parking lot after the Springsteen show. It's a sail compared to the rules on the 1099-K, and how they may or may not relate to taxes on a ticket resale.

The 1099-K is not meant to document and report the casual payments back and forth between family and friends - say, for a ticket. It's focused on reporting the money paid for goods and services.

But even if you aren't getting a 1099-K on a sold spare ticket, the IRS says it's still taxable.

Erin Collins, the IRS National Taxpayer Advocate, dug into the issue last month. The title of her blog post was replete with Taylor Swift references: "If You Resold the Hottest Ticket of Summer 2023, You Likely Didn't Receive a Form 1099-K - But This Won't Last Forever & Always."

"Whether you receive a Form 1099-K or not, the income from the sales of goods or services is taxable, and you will need to include it on your tax return," Collins wrote.

You may ask, "Who's going to know if the resale doesn't make it to the return?" But it's worth reporting sales of a personal loss, in case the IRS starts asking questions, DeRosa said.

Meanwhile, the profit on a resold ticket is income like other sources of income, said Cynthia Leachmoore, an enrolled agent at Soquel Tax Service in Soquel, Calif., and current president of the National Association of Enrolled Agents.

Leave that off your tax return at your risk, and keep your fingers crossed that the IRS does not decide to audit your return.

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Got a question about taxes? You can write to me at akeshner@marketwatch.com.

-Andrew Keshner

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03-12-24 1430ET

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