You can deduct all the expenses that went into selling. Don’t forget shipping supplies. You can also deduct credit card interest if applicable. I also deduct part of my utilities (Internet primarily) and expense part of my computer since I primarily use it for eBay. I even have a dedicated shipping computer that is 100% expensed as well as the printer and toner I use with it.
I don’t deduct my home office. Here’s why: you can only really deduct and save so much from your home office. But, once you treat that square footage as a business expense, it will be difficult to convert that back to a non-business asset when you get out of selling on eBay. And as a business asset, you do not get the write off of any gains if you sell your home for that portion of the house. So, if your home has gone up in value, the taxes on the equity you’ve gained may be more than you would ever save as writing it off as a business asset.
btw, income tax is easy. The tricky bit is if you have to file sales tax to your state. For example, in California, you have to register with the state board of equalization and submit sales tax on a annual schedule based on your sales amount. And when you do, that often triggers the county or city you live in to check your business license status and they will ask you ever politely to get a license. If you haven’t collected sales tax, at least many states will let you deduct the sales tax you paid when acquiring the sets towards the sales tax you should have collected. And if you shipped out of state primarily, that can bring the amounted owed to zero. At least that’s how it has worked every year for me. Although it’s still a pain to have to itemize every set and whether or not it was sold in or out of state and how much sales tax was paid on it originally.
Also be prepared for self employment tax (social security x2 since you are employee plus employer) and Medicare taxes. And your LEGO profits will be taxed at your marginal tax bracket as additional ordinary income.
It’s good you are asking. If you have good documentation and do everything by the book, it’ll take time, but it’s not terribly complicated. I use turbo tax and have never needed a professional. But I also did lots of research into the tax laws and keep meticulous details of my purchases and sales in a spreadsheet that I update on each transaction. I then create a new spreadsheet every year that has all of my itemized paypal transactions — so that the figure PayPal sends to the IRS is fully accounted for.