The Economics of Garage Sales

Close Encounters of the Cheap Kind has a new home at www.CheapEncounters.com!

OK, everyone has either held one or been to one. I’m talking about garage sales, that great piece of Americana where you put all the crap from your house that you no longer want or need out in your garage, driveway, or patio and let a bunch of random strangers come rummage through it and try to negotiate off your marked price of about 5% what you originally paid for the item. FiveCentNickel posted about garage sales this past week which got me to thinking – are garage sales worth the effort?

I think the biggest determinant of that is whether you itemize deductions on your taxes, and if so what is your marginal tax rate? If you don’t itemize or your marginal tax rate is only 10% or 15%, than having a garage sale will probably net you the most money. However, if you do itemize and your marginal rate is 25% or more, you’ll likely do much better just donating the items to Goodwill or another worthy charity and taking the deduction. Using the H&R Block Deduction Pro valuations for used goods, here is a quick breakdown of what a few sample donated items are worth and your tax benefit at a 28% marginal tax rate.

  • Men’s Dress Slacks (Like New) @ $15.10 = $4.23 tax savings
  • Men’s T-Shirt (Like New) @ $6.92 = $1.94 tax savings
  • Men’s T-Shirt (Minor Wear) @ $3.52 = $0.99 tax savings
  • Women’s Dress Slacks (Minor Wear) @ $9.30 = $2.60 tax savings

Clothes (except baby and kids) are usually the things that get the least at a garage sale, so if you have a lot of clothes ask yourself if the price you could get is greater than the tax savings numbers above. Other household items generally sell at slightly higher prices, so it may be worthwhile if you have a lot of random knick-knacks and such. Just remember that with a garage sale you also have the cost of signage, newspaper ads, and the cost of your time to set up and supervise your garage sale.

Another good thing to do whether you plan to have a garage sale or donate is to check to see if you could get more for items on eBay. If it is a higher-value item that could be easily shipped, you’ll likely do better on eBay than selling at a garage sale or taking the tax deduction.

If you decide to have a garage sale, be sure to check out FCN’s garage sale tips here.


June 22, 2007 - Posted by | Taxes, Tips

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