Every December someone in the group chat says it: "Sell your losers before the year ends, you'll save on taxes."
Sometimes that's true. Sometimes it's completely wrong. And for a lot of collectors, it doesn't work at all.
Here's how it actually works for cards, in plain English.
The 30-second version
- If you collect for fun, a loss does nothing for your taxes. But a gain still gets taxed.
- If you buy cards as an investment, a loss can lower your taxes, but only up to a limit each year.
- If you buy cards to resell as a business, a loss lowers your business income, and there's no yearly limit.
Step 1: Why do you own the card?
This one question decides almost everything. Not what the card is. Not what you paid. Why you own it.
- Collector: You own it because you like it. It's your PC.
- Investor: You own it because you think it'll be worth more later.
- Dealer: You own it because you plan to sell it. It's stock for your business.
You answer this card by card, not person by person. You can have a card you're flipping next week and a card you've been chasing since you were twelve, both in the same box.
Side by side:
- Collector. Why you own it: you like it. Can the loss lower your taxes? No. Is the gain taxed? Yes. The move: know this before you buy.
- Investor. Why you own it: you hope it goes up. Can the loss lower your taxes? Yes, with limits. Is the gain taxed? Yes. The move: sell before year end, use the loss against gains first.
- Dealer. Why you own it: you bought it to resell. Can the loss lower your taxes? Yes, fully. Is the gain taxed? Yes, as business income. The move: sell it, or write it down if it qualifies.
Collectors: the loss doesn't count
This is the hardest part, so it goes first.
If you own a card because you like it and you sell it for less than you paid, that loss does nothing for your taxes. You can't subtract it. You can't save it for next year. It just disappears.
Why? The tax rules only let you write off three kinds of losses: losses in a business, losses on something you bought to make money, and losses from things like theft or disaster. A card you bought because you wanted it isn't any of those. And for personal stuff, even theft and disaster losses now count only when they come from a federally declared or, starting in 2026, a state-declared disaster (IRC §165(h)(5)), so a stolen PC card usually doesn't count either.
The unfair part
It only works one way. If that same card goes up and you sell it, the gain is taxed. So the government shares your wins but not your losses. That's how the law is written on purpose, not a loophole someone forgot to close.
Example. You bought a card for your PC at $500. Two years later you sell it for $300. Your $200 loss: doesn't count. You bought a different PC card at $500 and sell it for $900. Your $400 gain: taxed.
You can't switch labels when you sell
A lot of people try this: "I always kind of hoped it would go up, so really it was an investment." That doesn't work. What matters is your main reason for owning it. If you mostly owned it because you loved it, calling it an investment on December 30 because it lost value won't hold up.
If you really do buy and hold certain cards as investments, that's worth talking through with a CPA or enrolled agent, based on how you actually buy, store and sell them.
Investors: this is where it works
If you bought a card as an investment, a loss can lower your taxes. But there's an order to it, and a limit.
How your loss gets used, in order
- First, it cancels out your gains. Lost $2,000 on one card and made $2,000 on another? They cancel. No limit on this step.
- Then, up to $3,000 comes off your regular income (like your paycheck). That's the max per year. It's $1,500 if you're married and file separately.
- Anything left over rolls to next year. It waits and gets used the same way next year, and the year after, until it's gone.
Example 1: the easy one. You lost $4,000 on a Doncic and made $1,500 on a Wemby. The loss cancels the $1,500 gain. That leaves $2,500 of loss, which is under the $3,000 limit, so all $2,500 comes off your income this year. Done.
Example 2: the one that surprises people. Same $1,500 gain, but this time you lost $12,000. $1,500 cancels the gain. $3,000 comes off your income this year. The other $7,500 rolls forward. If you don't have gains next year, it comes off at $3,000 a year, so it takes about two and a half more years to use up.
The napkin math is usually too optimistic
People often do this: "$12,000 loss times my 24% tax bracket = $2,880 saved." That's wrong in three ways, and all three make the deal look better than it is:
- Part of the loss just cancels gains, which may be taxed at a lower long-term rate than your paycheck.
- Only $3,000 per year comes off regular income. The rest is stuck waiting.
- Money you save in 2029 isn't worth the same as money you save now.
The honest answer is always three numbers: what cancels gains, what comes off income this year, and what rolls forward.
What about the "28% collectibles tax"?
You've probably heard that collectibles get taxed at 28%. Two things to know.
It's a rate on gains. A card loss still counts in your overall math and can cancel out a gain on anything, including stocks.
It isn't even settled for modern cards. The law lists specific collectibles like coins, stamps, art and gems. Trading cards aren't on that list, and the IRS has never officially added them. So whether a card gain gets the 28% rate or the regular, usually lower, capital gains rate is an open question. If you have a big gain, decide that with whoever does your taxes. There's a form (Form 8275) that lets you tell the IRS which way you went, and if you take the lower rate, filing it helps protect you from penalties.
Dealers: a different game
If you buy cards to resell as a business, your cards are inventory, like a store's shelf stock. That's actually simpler:
- Your losses reduce your business income dollar for dollar.
- There's no $3,000 limit and nothing rolls forward.
- "Harvesting" isn't really a thing you need to do. You have two options instead.
Option 1: Sell it
Sell below what you paid and the loss is simply part of your business costs. The sale itself is your proof. Done, and that card is closed for good.
Option 2: Write it down without selling
This option is for dealers who keep formal inventory. If you use the simplified small-business method (IRC §471(c)), your cost comes off when the card sells, so selling is your option.
If a card can't sell at its normal price because of damage, a defect, wear, or something similar, a dealer can lower its value on the books without selling it. That lowers this year's taxable income.
But there are real rules:
- You need an actual reason. For most dealers, "the price dropped" doesn't count. "Print defect visible under UV that makes it worth less than clean copies" does.
- You need proof of the price. Specifically, a record that you actually offered it for sale at that lower price, within 30 days after the date you count your inventory.
- There's a catch later. If the card bounces back and you sell it for more than the written-down value, that extra counts as business income.
If you've written cards down in past years, keep doing it the same way. Switching methods is something to check with your tax preparer first.
Which option?
- Think it'll come back? Write it down and keep the card. Don't? Sell it.
- Can you prove the reason and the price? If not, selling is the safer route.
- Is it worth the hassle? A $4 loss eaten up by $2 in fees and $3 in shipping isn't worth doing for taxes.
Good news for everyone: no wash sale rule
If you've ever sold stock, you may know the "wash sale" rule: sell a stock at a loss and buy it back within 30 days, and the IRS won't let you count the loss yet.
That rule only covers stocks and securities. It doesn't cover cards, at least under today's law. (Congress has talked about expanding it before, so this could change.)
So if you sell a card at a loss and buy the same card back later, the loss still counts. Your cost for the new copy is just whatever you paid for it. That's actually a better deal than stock investors get.
Two traps to avoid
Trap 1: Selling to family
If you sell a card at a loss to a family member, the loss is not allowed. Period. That includes your spouse, siblings, parents, grandparents, kids and grandkids, and any company you own more than half of.
It doesn't matter when you do it or why. It only matters who bought it. Selling a card to your brother to "lock in a loss" doesn't work.
Trap 2: Fake sales
No wash sale rule doesn't mean anything goes. If you set up a sale and buyback at the same time with a friend, just to create a loss on paper, the IRS can ignore it.
The more real the sale, the safer you are. Listing a card normally, actually letting it go, and later buying one at whatever the market price is then: fine. Arranging both sides in advance with a buddy: that's the kind of thing that gets thrown out.
"Sell before December 31" means what, exactly?
For a loss, the sale counts when it's actually complete: the buyer has committed and the card has left your hands. When the money arrives doesn't matter. An order placed December 31 that ships January 3 may count as a January sale.
Platforms do matter in the last week of the year, though:
- eBay, TCGPlayer, COMC: a card that sells and ships in late December is generally a December sale.
- StockX and other authentication platforms: they hold your money until the card is checked. Ship December 29, delivered January 2, authenticated January 3, and it could reasonably count as a January sale.
The simple rule: if you're selling for tax reasons, don't wait until the last few days. Give yourself room.
Quick answers
Can I write off a loss on a card from my personal collection?
No. But if you sell a PC card for a profit, that gain is taxed.
Does the 28% collectibles rate make my loss worth more?
No. It only applies to gains, and it's not even settled for modern cards.
How much of a big loss can I use this year?
All of it against gains, then up to $3,000 against regular income. The rest rolls to next year.
If I sell a card and buy it back, does my loss still count?
Yes, under current law. The wash sale rule is for stocks, not cards. Just make sure it's a real sale, not a setup.
Can I sell it to my brother to lock in the loss?
No. Losses on sales to close family aren't allowed.
I'm a dealer. Does the $3,000 limit apply to me?
No. Your losses reduce business income directly. You can sell the card, or write it down if it has a real defect or damage and you can prove the price (write-downs apply only if you keep formal inventory).
Does the money have to arrive by December 31?
No. For a loss, the sale needs to be complete by then, with the card sold and shipped. Authentication platforms can push a very late sale into January, so start early.
The bottom line
Figure out why you own the card before anything else.
- Collector: losses don't count, gains do. Know that before you buy.
- Investor: losses help, but they cancel gains first, then only $3,000 a year comes off your income.
- Dealer: losses reduce business income. Sell it, or write it down if it truly qualifies.
And for everyone: no wash sale rule for cards right now, and never sell to family to take a loss.
KKATC Cards was built for exactly this. Every card captures the reason you own it, what you paid and what happened to it. So when December comes, you're reading your records instead of trying to remember your entire year. Start free with KKATC Cards. For the exact law behind any line here, ask KKATC Tax.
Where this comes from: the Internal Revenue Code and Treasury Regulations, as amended through 2025. Main sections: collector losses, IRC §165(c) and §165(h)(5); investor loss order and the $3,000 limit, IRC §1211(b) and §1212(b); the 28% rate, IRC §1(h)(4) and §408(m); Form 8275 and penalty protection, IRC §6662(d)(2)(B); dealer inventory and write-downs, IRC §1221(a)(1), IRC §471(c), Treas. Reg. §1.471-1(b)(4)(i) and Treas. Reg. §1.471-2(c); wash sales, IRC §1091; family sales, IRC §267; fake round trips, IRC §7701(o); sale timing, IRC §165(a) and Treas. Reg. §1.165-1(d)(1).
This is general tax information, not tax advice. Talk to a CPA or enrolled agent about your own situation.