Sold or Traded Pokémon Cards This Year? The 28% Collectibles Rule and the Trade Mistake Everyone Makes

If you flipped a Moonbreon on eBay in March, traded a stack of slabs at a card show in July, and still have 400 raw cards in a binder, the IRS does not see a hobby. It sees a series of sales and exchanges, each with its own basis, holding period and tax rate, and it expects every one of them on your 2026 return by April 15, 2027. Most collectors find this out in February, when a Form 1099-K shows up listing gross sales with no cost behind them.

This post walks through the three questions that decide how your cards are taxed, the one rule almost everyone gets wrong (trades are taxable), and how to build basis records that hold up.

The rule: cards are collectibles, and collectibles have their own rate

Section 408(m)(2) defines a "collectible" as any work of art, rug, antique, metal, gem, stamp, coin, alcoholic beverage, or "any other tangible personal property specified by the Secretary." Trading cards are not named in the statute and there is no ruling that squarely classifies them, but practitioners treat them as collectibles, and I would not plan on arguing otherwise.

That classification matters because of §1(h)(4) and (5). Long-term capital gain on a collectible is taxed at your ordinary rate, capped at 28%, instead of the 0%/15%/20% rates that apply to stock. If your ordinary bracket is 22%, you pay 22%. If it is 35%, you pay 28%. Short-term gain (held one year or less) is ordinary income either way. Add the 3.8% net investment income tax under §1411 if your modified AGI is over $200,000 single or $250,000 joint.

Texas has no personal income tax, so there is no state layer on the gain. There may be a Texas sales tax layer if you are a dealer; more on that below.

The three questions that decide your tax

1. Are you a hobbyist, an investor, or a dealer?

This is the question people skip, and it changes every line that follows.

A hobbyist collects for enjoyment and sells occasionally. Gains are capital gains on Form 8949 and Schedule D. Losses on personal-use property are not deductible under §165(c), and hobby expenses (sleeves, binders, show tickets) are not deductible at all after the TCJA suspended miscellaneous itemized deductions, a suspension the One Big Beautiful Bill Act of 2025 made permanent.

An investor buys with a profit motive and holds. Gains are still capital gains at the collectibles rate, but losses now count: they net against other capital gains, and up to $3,000 of excess loss offsets ordinary income each year under §1211(b), with the rest carried forward under §1212. Investment expenses are still nondeductible, but costs that attach to a specific card (grading, shipping to the grader, auction fees on the sale) adjust basis or reduce the amount realized.

A dealer buys to resell in a regular, continuous business. Sales are ordinary income on Schedule C, cards on hand are inventory, expenses are deductible under §162, and net profit is subject to 15.3% self-employment tax under §1402. The holding period is irrelevant and the 28% cap never applies. If you are running a storefront, a weekly eBay volume, or a booth at every regional show, you are probably here whether you like it or not.

The edge case: the same person can be two of these. A dealer who keeps a personal PSA 10 collection separate from inventory has a capital asset and a business. Keep the records separate from day one or the IRS will decide the split for you.

2. What is your basis in each card?

Basis is what you paid, adjusted for costs that attach to the card. Under §1012, a card bought for $180 plus $20 to grade it has a basis of $200.

The cases that trip people up:

• Sealed product and box breaks. A $120 booster box that yields one $400 hit and 359 bulk cards does not have a $120 basis in the hit. Allocate the cost across what you pulled based on relative fair market value at the time of the break and keep the allocation in writing.
• Gifts. A card your uncle gave you in 2004 carries his basis under §1015, not its value when you received it. If nobody knows what he paid, the IRS position is zero basis.
• Inherited cards. Basis steps up to fair market value at the date of death under §1014. Get a contemporaneous appraisal or comparable sales from that date.
• Trades. Your basis in a card received in a trade is its fair market value on the day of the trade. See the next question.

3. Did you trade anything?

Here is the mistake I see most. A card-for-card trade with no cash changing hands is still a sale and an exchange under §1001. Since 2018, §1031(a)(1) limits like-kind exchange treatment to real property, so there is no deferral for trading one collectible for another.

Concrete example: you bought a Charizard for $600 in 2023. In 2026 you trade it straight across for a Lugia worth $1,500. You recognize $900 of long-term collectibles gain in 2026, even though you never touched cash, and your basis in the Lugia is $1,500. If you then sell the Lugia for $1,400 in December, that is a $100 short-term loss, deductible only if you are an investor or dealer.

Two related points. The wash-sale rule in §1091 applies only to stock and securities, so selling a card at a loss and rebuying the same card is not disallowed. And a prize card (a tournament win, a giveaway) is ordinary income at fair market value when received, which becomes your basis.

Forms and mechanics

Capital sales go on Form 8949 (check box C or F for no-1099-B transactions), flow to Schedule D, and the 28% calculation runs through the 28% Rate Gain Worksheet in the Schedule D instructions. Dealers report on Schedule C and Schedule SE. Noncash donations of cards worth more than $500 need Form 8283, and more than $5,000 needs a qualified appraisal.

On the 1099-K: the OBBBA restored the federal threshold to $20,000 and 200 transactions for third-party settlement organizations, retroactively. eBay, TCGplayer and payment apps issue a 1099-K only above that line. A 1099-K reports gross receipts before fees, refunds and basis, and the absence of a 1099-K does not mean the income is unreported; it means nobody told the IRS but you.

Deadlines and filing

Your 2026 return is due April 15, 2027. If card gains push your 2026 tax above what withholding covers, the Q4 estimated payment is due January 15, 2027, and the underpayment penalty under §6654 runs at the federal short-term rate plus 3 points from the quarter you missed. Dealers who make more than two sales in a 12-month period generally lose the Texas occasional-sale exemption and need a Texas sales tax permit; verify your facts against Tex. Tax Code §151.304 before relying on the exemption.

What to track for every card

Whatever your classification, the record that survives an IRS inquiry has six fields per card: acquisition date, how you got it (purchase, break, gift, inheritance, trade, prize), cost or allocated cost, grading and shipping costs added to basis, disposition date, and proceeds or fair market value received. A spreadsheet with one row per card, kept as you go, is enough. Rebuilding it from eBay history and memory three years later is not.

What to do this week

Open your eBay, TCGplayer and PayPal sales history for 2026, export it, and put a cost next to every card you sold or traded. If the basis column has blanks you cannot fill, that is the number to fix before April, not after. If your volume looks like a business, or you have three years of trades you never reported, that is the kind of cleanup and tax work we do at Crossroads Growth: rebuild the basis records and file the amended returns.

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