Guide
Valuing a swap, barter and tax, and putting it in writing
Short, plain notes for two people swapping goods or work directly. Where a fact comes from somewhere, the source is linked.
Putting a value on things
The fair value of a used thing is what a willing buyer would pay for it, today, in its condition. The best evidence is what the same item has actually sold for recently, not what sellers are asking. Most marketplaces let you filter listings to sold or completed items.
When you only know the price new, the Trade Scale's condition ladder gives a starting point to talk from:
- New, unopened (100% of new)
- Like new (80% of new)
- Good, light wear (60% of new)
- Fair, clear wear (40% of new)
- Worn, still works (20% of new)
This ladder is a rule of thumb written for this site, not a market survey. Some things hold their value far better (good hand tools, some instruments) and some lose it fast (phones, computers, most electronics). If you know a real sold price, enter it with “Value as entered”.
Agree the value together
The values that matter in a swap are the ones you both accept. The IRS says the same in its guide to taxable income: if both people agree the value of services ahead of time, that value is accepted as the fair market value unless it can be shown to be otherwise (Publication 525, Bartering).
Putting a value on work
Work is valued as hours times an hourly rate. Use the rate you would charge, or would pay someone else, for the same job. For a neutral reference, the US Bureau of Labor Statistics publishes wages by occupation and area in its Occupational Employment and Wage Statistics. A rate you both agree beats any table.
When two people's rates differ, a swap of one hour for one hour is not even. The scale shows how many more hours of the lighter side's work would close the gap, rounded up to the next quarter hour.
Barter and US tax
From the IRS's Topic No. 420, Bartering income:
“You must include in gross income in the year of receipt the fair market value of goods or services received from bartering.”IRS Topic No. 420
- Barter income from your business generally goes on Schedule C (Form 1040); otherwise it generally goes on Schedule 1 (Form 1040).
- Barter exchanges (organizations whose members contract to swap) must file Form 1099-B. People who trade services directly, outside an exchange, are not required to file Form 1099-B but may be required to file Form 1099-MISC.
- The IRS says “barter exchange” does not include informal swaps of similar services on a noncommercial basis, giving a neighborhood babysitting cooperative as its example.
- If you receive barter income, you may need to make estimated tax payments (Form 1040-ES).
Swapwright is not a barter exchange and files nothing for anyone. The Trade Tab's yearly totals and the Swap Sheet are records to help you; they are not tax advice. For your own situation, read the IRS pages above or ask a tax professional.
Putting it in writing
Most swaps that go wrong do so over something nobody said out loud: when things change hands, what condition they are in, what happens if the work is not finished. A written note answers those questions before they are asked. A good one says:
- who the two people are and the date;
- exactly what each side gives, with the values you agreed;
- the difference, if any, and how it is settled;
- when things change hands, and what happens if one side cannot deliver;
- signatures from both of you.
The Swap Sheet lays all of that out on one page. It is a plain record of what two people agreed, not a contract drafted by a lawyer. For anything valuable, such as a vehicle, property, or anything with a title or registration, follow the official transfer process where you live as well.
What Swapwright will not help price
Do not use the tools to weigh or record swaps of weapons or ammunition, prescription or illegal drugs, alcohol or tobacco, live animals, stolen goods, or anything else that is illegal to sell or trade where you live. A swap is a sale in all but name: the same laws apply.