Even if you don’t own a business, you may occasionally trade products or services with someone else instead of paying cash. If you barter, the value of the goods or services you trade is considered taxable income. Here are some things to keep in mind:
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• Both parties in a trade must report the fair market value of the products or services they receive as income on their tax returns.
• Barter exchanges, organized marketplaces where members trade goods or services, are required to issue Form 1099-B, “Proceeds from Broker and Barter Exchange Transactions.” You must include the amount earned on your tax return.
• Bartering is taxable in the year the trade occurs. Depending on your individual situation, you may owe income taxes, self-employment taxes, employment taxes, or excise taxes on your bartering income.
If you have questions about how to handle income from bartering or other sources, contact a tax professional.
* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov[8]
[8] www.irs.gov/forms-pubs/about-form-1099-b
