Only business users can write down a vehicle.
Selling a car for more money. Capital gain?
- Thread starter VK56VD
- Start date
- Status
Originally Posted By: eljefino
My state specifically says you can't flip more than 5 cars a year without being a dealer, but a car you hold onto for six months is exempt from this rule.
It would be interesting to have a car for nine months, and on a different radar for the state vs feds.
So flip them in Massachusetts instead.
My state specifically says you can't flip more than 5 cars a year without being a dealer, but a car you hold onto for six months is exempt from this rule.
It would be interesting to have a car for nine months, and on a different radar for the state vs feds.
So flip them in Massachusetts instead.
The government has become "The Managing Partner" for most, not a minor player as it should be. You may recall Congress wanted to require a 1099 and tax every time anything sold private and public, just a few years back, just like the Soviet Union. Thankfully that nightmare accounting notion failed.
Keep those few dollars you make selling a car. It wont matter much compared with the thousands of dollars they take from you..if your lucky enough to be working full time.
Keep those few dollars you make selling a car. It wont matter much compared with the thousands of dollars they take from you..if your lucky enough to be working full time.
Unless you say anything......who would know???
Unless you are running a business investing and then flipping cars you should not worry about it. If you buy a car for 10,000 and drive it for 2 years and sell it for 5,000 you are not allowed to take a 5,000 business expense or investment loss. Same holds true if for some reason your car goes up 5,000 in value when you sell it it is not an investment gain because your personal use cars are not an investment.
This is a 'problem' most of us wish for. 99% of our used cars sell at a loss. A loss that we cannot deduct.
The amount of time I would worry about a situation like this. NADA, ZIP, ZERO. Take that money and do what you like with it. BTW I was asked once by an IRS agent what kind of car I drove. At the time it was a 66 Mustang Fastback. He just looked at me and shook his head. I couldn't help but laugh. And yes they do come and knock on your door.
Consult an accountant but yes it is reportable income. See here for explanation:
http://www.irs.gov/taxtopics/tc409.html
That you sell a personal use asset such as a car for a loss has nothing to do with this subject as explained in the link.
If you are ever audited you could have a problem.
http://www.irs.gov/taxtopics/tc409.html
That you sell a personal use asset such as a car for a loss has nothing to do with this subject as explained in the link.
If you are ever audited you could have a problem.
Buy and sell for cash and nobody has to know anything
Originally Posted By: dishdude
Unless you get a 1099 don't worry about it.
My guiding philosophy. No 1099, then it didn't happen.
Unless you get a 1099 don't worry about it.
My guiding philosophy. No 1099, then it didn't happen.
Off topic, but of the same nature, nearly every state has a use tax law on the books. When filing, don't forget to submit your tax payment for all of the untaxed, mail order items you purchased last year.
Great discussion.
Same would hold true for many things; even those that appreciate.
You may sell your 75 year old dining room table for $500. Your grandparents paid $100. Your basis is $0 as they left it to you. $500 gain. Probably not going to report.
PA gets their windfall tax and it kills me every time. I buy a $20,000 car and pay $1200 PA tax. Sell it and new buyer pays PA, not me, another 6% on $15,000, then he sells it for $10,000....
15% to the state for a few transactions.
Trade in a car? $20,000 add $1200 tax subtotal $21,000 THEN subtract $5,000 trade.
The state gets theirs even if the IRS does not.
Same would hold true for many things; even those that appreciate.
You may sell your 75 year old dining room table for $500. Your grandparents paid $100. Your basis is $0 as they left it to you. $500 gain. Probably not going to report.
PA gets their windfall tax and it kills me every time. I buy a $20,000 car and pay $1200 PA tax. Sell it and new buyer pays PA, not me, another 6% on $15,000, then he sells it for $10,000....
15% to the state for a few transactions.
Trade in a car? $20,000 add $1200 tax subtotal $21,000 THEN subtract $5,000 trade.
The state gets theirs even if the IRS does not.
Originally Posted By: Spartuss
I'm not sure if this has been discussed but it may benefit us all. Lets say one of us on this forum, purchases a used vehicle for $5,000. Less than a year later, sells it for $10,000. ....
It would be some kind of income, I would think, probably ordinary, but I'm not an accountant - that is who I would look to for a definitive answer.
My G8 is a business vehicle ( as was the GTO before it ), and gets depreciated on my books, so if it is ever sold, I am sure there will be some kind of tax event.
I'm not sure if this has been discussed but it may benefit us all. Lets say one of us on this forum, purchases a used vehicle for $5,000. Less than a year later, sells it for $10,000. ....
It would be some kind of income, I would think, probably ordinary, but I'm not an accountant - that is who I would look to for a definitive answer.
My G8 is a business vehicle ( as was the GTO before it ), and gets depreciated on my books, so if it is ever sold, I am sure there will be some kind of tax event.
I'll sum it all up for you. Yes, it would be a taxable gain upon sale. Because it was held less than 12 months, it would be short term and taxed at the incremental tax rate according to your other income total. That could be as low as 10% or as high as 39.6% in 2015.
If sold after 12 months, then it's taxed at capital gain rates which are 0% to 15%. If it falls into collector status, then the rate jumps to 26%.
And no, a loss on the sale cannot be used to offset any gains or any other ordinary income, unless the car is used for >50% business use. But a loss is unlikely because whether or not you take a depreciation deduction for business use the book value of the asset will likely be less than it's FVM at the time of sale. This is due to the front loaded nature of most tax based depreciation schedules.
If sold after 12 months, then it's taxed at capital gain rates which are 0% to 15%. If it falls into collector status, then the rate jumps to 26%.
And no, a loss on the sale cannot be used to offset any gains or any other ordinary income, unless the car is used for >50% business use. But a loss is unlikely because whether or not you take a depreciation deduction for business use the book value of the asset will likely be less than it's FVM at the time of sale. This is due to the front loaded nature of most tax based depreciation schedules.
you can not include your labor
Originally Posted By: fdcg27
This is clearly a reportable gain.
This kind of thing is so far off the IRS radar that I wouldn't worry about it.
IRS would have to search state title transfers to even find this type of very rare event.
Also, who can say how much you spent on repairs to make the 5K distressed property into a 10K dreamboat, as others have posted?
Your labor hours can be assigned a reasonable value as well.
Thi
s is not the kind of thing that I'd even think of reporting.
Originally Posted By: fdcg27
This is clearly a reportable gain.
This kind of thing is so far off the IRS radar that I wouldn't worry about it.
IRS would have to search state title transfers to even find this type of very rare event.
Also, who can say how much you spent on repairs to make the 5K distressed property into a 10K dreamboat, as others have posted?
Your labor hours can be assigned a reasonable value as well.
Thi
s is not the kind of thing that I'd even think of reporting.
Last edited:
very wrong, sales of personal use property at a gain are reportable
Originally Posted By: ISO55000
By the letter of the law cars for personal use are not a capital asset under the statute and not required to be reported as income tax but could follow under misc. income.
If that vehicle is a business vehicle than that’s a capital item but goes to the business. It really depends on how your personal books are set up because there are several different ways to play that scenario and ways to reduce amounts.
Consult with a tax attorney then an accountant like I do- that’s money well spent.
Originally Posted By: ISO55000
By the letter of the law cars for personal use are not a capital asset under the statute and not required to be reported as income tax but could follow under misc. income.
If that vehicle is a business vehicle than that’s a capital item but goes to the business. It really depends on how your personal books are set up because there are several different ways to play that scenario and ways to reduce amounts.
Consult with a tax attorney then an accountant like I do- that’s money well spent.
- Status
Similar threads
