Tax Consequences of Selling a Domain Name

When you sell a domain name, how does the IRS want you to declare the income? (Don't even think of leaving it off your tax return!)

At the heart of the issue, most domainers as well as the general population are confused about the status: Are domains considered PROPERTY?? According to the IRS, yes: they're intangible property.

After speaking to several IRS representatives, I learned that domains (with or without a website) are considered a business asset. Therefore the proceeds are Taxable Gains income which should be reported on Schedule D - Section 197 "Selling Business Property."

If you have been counting your annual domain registration fees as a business expense (as I do), then you won't report that money as part of the base. Also, depreciation doesn't seem to apply, or so the IRS agents told me, so you can leave that blank.

DISCLAIMER: I am not a tax professional so you should check with your accountant or call the IRS to get information tailored to your circumstances.