This is not my understanding of how the tax code works. If the garage sale is not part of a business and you are selling an item you used for less than you paid for it, you generally have no reportable income. Everything I could find online seems to agree, [1] for example.
Agreed. I think the parent is confusing it with the case where you buy an item for your business, depreciate it to zero (thus deducting its full value as an expense), and then later find out you can salvage some value on resale. In that case, you would have reportable/taxable income from that resale, which you can think of as “correcting the overdeduction for depreciation.”
The link you posted explains the difference between business income and hobby income. It just depends on how often you have a garage sale. Like everything with the IRS, it's complicated, and also they usually don't care with small amounts anyway.
Even if you take this viewpoint, it still means you can't depreciate the item, because it wasn't part of your income producing activity until just that moment, which means the depreciation is zero, since depreciation can only be taken based on the time the item was used for your income producing activity.
That’s not what that means. That phrase is referring to you using an item as a tool to generate income. You could depreciate a desk that you work at, but not the one that your kids do their homework on. (Because homework is not an income generating activity)
I want to see the guy who lists his Bic pens that he lets customers use to sign contracts. Yes, it has a limited lifetime. Yes it will last over a year. Yes you'll be audited if you claim depreciation on them.
You can, but why would you? Buying into the accounting-uber-alles paradigm only makes sense for business that can actually benefit by deducting the depreciation. Individual taxpayers get no such benefit, and therefore have no need to depreciate items. And without depreciation, yard sales consist chiefly of capital losses.
The IRS says that the item depreciates whether you claim it or not. It is in your best interest to claim it, because when you sell the item, they assume the depreciated value.
This comes up when you own rental houses. If you sell the house later, they reduce the base price by the assumed depreciation of the structure, whether you took the deduction or not.
Tax code deducts from your basis in an item the "depreciation allowed or allowable".
For personal property [such as typically sold in a garage sale], there is no depreciation allowed or allowable, so your basis in the good is whatever you paid for it.
Ok, maybe the US tax system is very different from the Canadian tax system, but I've never heard of someone claiming depreciation on personal use of children's toys.
But I doubt most people claim their garage sale income.