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What is the legality of bartering goods and services in a non-business setting? Say I'm on Craigslist, and I trade my car for a service or another product.

Do I need to declare that on my taxes, and if so, how do I assess the market value of those goods or services?

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    Please add a jurisdiction tag. Note that in the US, one typically has to consider state and local sales tax, which is likely to have a much larger effect than income tax in this case.
    – Nate Eldredge
    Jan 1, 2018 at 16:26

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Both of these answers assume U.S. law.

Craigslist has no liability per a statute commonly known as Section 230.

In a barter transaction, each party must declare as income on their tax return the fair market value of the goods or services received, by a commercially reasonable means (subject to audit), less any basis (or, in the case of accrual accounting taxpayers, at least, any cost of good sold expense deduction) applicable to goods parted with.

Under changes to the tax law effective January 1, 2018, this answer applies even if the barter involved tangible personal property of "like kind" which was previously not taxable under Section 1031 of the Internal Revenue Code.

Section 1031 continues to provide special treatment to barters involving investment real estate.

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    I'm a little confused because I thought that in general, when an individual sells their personal property, the proceeds of the sale aren't taxable income. You might owe capital gains tax on the difference between the sale price and your basis (less depreciation if any) but not on the whole sale price. (And for an individual selling a car, usually it's sold for less than its purchase price and not depreciated, so there are no taxable gains.) Are you saying the situation changes if you trade your car for goods / services instead of selling it for cash?
    – Nate Eldredge
    Jan 1, 2018 at 16:27
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    @NateEldredge your understanding is correct for personal goods - the car may be a business asset in which case it is deprecated and any gain/loss is taxable.
    – Dale M ♦
    Jan 1, 2018 at 21:46
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    @NateEldredge In a barter there are two simultaneous transactions. The sale of the bartered good (which could result in a capital gain or profit from a sale of inventory in the case of a non-capital asset) and a purchase of the bartered good or service. If you are an art broker who sells a painting with a $2000 basis and a $4000 FMV in exchange for legal services worth $4000 from a lawyer, the art broker has a $2000 capital gain and the lawyer has $4000 of service income. If the lawyer trades $4000 of services for $4000 of dental services, the dentist and the lawyer each have $4000 of income.
    – ohwilleke
    Jan 2, 2018 at 19:56
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    @NateEldredge I've clarified the answer to reflect basis issues.
    – ohwilleke
    Jan 2, 2018 at 19:58
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    @AlexW.H.B. Fair market value is defined as the price a willing buyer would pay to a willing seller under no undue compulsion. In the case of a car, one would usually use a Bluebook value.
    – ohwilleke
    Jan 2, 2018 at 20:00

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