sold car now what!

[its-a-mario]

bschomske - please speak with a tax professional. The tax treatment of the gain or loss will depend on a bunch of factors. In theory (since I've never sold a car at a profit), any gain on a sale of a car is subject to federal income tax regardless of whether you are a dealer, an investor, or just a hobbyist. However, losses may or may not be deductible depending on your status. The character of the gain or loss (i.e., ordinary or capital) will also depend on your status as a dealer. You measure gain or loss by comparing your "amount realized"--what you got for the car (in cash, trade or otherwise)--to your tax basis. In very general terms, your tax basis is what you paid for the car plus what you put into it to improve it (but probably not maintenance). This stuff is fact intensive and complicated. I've been a tax advisor for over 20 years and I can tell you that it's not worth playing games with the IRS--unless you live off the grid and only use cash (and no banks), the IRS has tools to sniff out suspicious activity.

 

[Cranky]

Should not be a problem unless you're running you car resto's as a business. Then you should have receipts for everything so you can show a legit profit or loss. But I suspect that is not the case with you. You can consult a tax accountant just to make sure. I'f you're going to take a cashiers check, do all you can to make sure it's legit, a lot phony ones being passed. Hold the title, whatever, until it clears. Or just accpet cash and get one of those verifying devices RC mentioned. Maybe do the transaction at your bank so you can have the bank validate the check/bills. And yes, structuring deposits can be an issue. I have friends that are bankers and we discussed this issue. Banks look for trends. Several deposits over time an be an even bigger red flag. Thus the issue with fiat currencies. good luck.

Heck, I got a bad 100 dollar bill FROM the bank years ago when 100 bucks was actually worth something....

 

[ws23jrt]

Heck, I got a bad 100 dollar bill FROM the bank years ago when 100 bucks was actually worth something....

Glad you mentioned the issue of time passing and money losing value constantly due to inflation.

Let's say I bought a car for $2500 in 1978--(in seventies dollars). To me, this translates to about $25000 in today's money.-(for the sake of discussion this is close)
If I sold the car today for $25,000 --would I be liable for capital gain taxes on the difference?--($25,000-$2500= $22,500)--

In reality, (in this example) I would -NOT- have a "financial gain". I would be breaking even.

Assuming the tax rate for "capital gain" is 15%.--(%15 of $22,500 = $3375). Would I be on the hook with IRS for $3375 in today's dollars? (in 1978 dollars that would be about $337.50)

I'm I missing something fundamental with my thinking on this?

 

[Cranky]

2500 in 78 has the buying power of just under 10k does today....roughly. It also depends on where you live but it shouldn't vary too much.

 

[WileE]

Glad you mentioned the issue of time passing and money losing value constantly due to inflation.

Let's say I bought a car for $2500 in 1978--(in seventies dollars). To me, this translates to about $25000 in today's money.-(for the sake of discussion this is close)
If I sold the car today for $25,000 --would I be liable for capital gain taxes on the difference?--($25,000-$2500= $22,500)--

In reality, (in this example) I would -NOT- have a "financial gain". I would be breaking even.

Assuming the tax rate for "capital gain" is 15%.--(%15 of $22,500 = $3375). Would I be on the hook with IRS for $3375 in today's dollars? (in 1978 dollars that would be about $337.50)

I'm I missing something fundamental with my thinking on this?

Excellent question ! Also, my question is... if I bought a car 10 years ago for $10k & sold it now for $20k, I have to declare a $10k gain ? What about when I bought a new car 10 years ago for $40k & now I sold it for $12k, why can't I likewise declare a $28k loss ?

 

[Budnicks]

https://www.dmv.org/articles/income-tax-implications-of-selling-a-used-car/

 

[towtruckAl]

In canada if you buy a car and sell it in same year and make a profit you are supposed to declare the diff as profit income . And if it is your personal transportation and you sell next year or further down line it was tax exempt . My mother was chartered account and i drove her nuts with my cash buying or selling . the bank rules are the same up here as down there . likely worse

 

[rlem1977]

So, keep ALL receipts for the "build". Every bolt, gasket, etc. needed to complete the car.

 

[ws23jrt]

[

Excellent question ! Also, my question is... if I bought a car 10 years ago for $10k & sold it now for $20k, I have to declare a $10k gain ? What about when I bought a new car 10 years ago for $40k & now I sold it for $12k, why can't I likewise declare a $28k loss ?

I see you get my question. In the case of your question, (about a new car) the loss of value is due to depreciation. And I agree that is indeed a loss.
The IRS is not the least bit interested in being fair.

Sometimes the cars we are dealing with -gain value (appreciation) because of silly people like us that like them so much. So here comes the IRS to get their cut of whatever we have fallen into.

As I recall the IRS has entitled themselves to a cut of -any- financial gain. This includes illegal activities such as drug dealing (for example). Financial losses are rather restricted and tough to justify because an effort to give back money for any reason is counterproductive.

We the people (from the viewpoint of the IRS) are the bees that make the honey. The IRS is the bear that tends to smash the hive looking for a day of feeding.

 

[ws23jrt]

So, keep ALL receipts for the "build". Every bolt, gasket, etc. needed to complete the car.

I like this. Always wanted to overwhelm an auditor with a mountain of proof that exposes the inane idea of it all.

 

[its-a-mario]

Glad you mentioned the issue of time passing and money losing value constantly due to inflation.

Let's say I bought a car for $2500 in 1978--(in seventies dollars). To me, this translates to about $25000 in today's money.-(for the sake of discussion this is close)
If I sold the car today for $25,000 --would I be liable for capital gain taxes on the difference?--($25,000-$2500= $22,500)--

In reality, (in this example) I would -NOT- have a "financial gain". I would be breaking even.

Assuming the tax rate for "capital gain" is 15%.--(%15 of $22,500 = $3375). Would I be on the hook with IRS for $3375 in today's dollars? (in 1978 dollars that would be about $337.50)

I'm I missing something fundamental with my thinking on this?

Under current law, you would have a capital gain of 22,500 subject to tax in today's dollars. There have been proposals to index tax cost basis for inflation to correct for the appreciation in value due solely to inflation. IIRC, this was proposed as recently as last year, but didn't have the support. I'm guessing it would be a big hit to tax revenues. Other countries already have this concept in their tax systems and it seems like a very fair approach.

 

[WileE]

[



I see you get my question. In the case of your question, (about a new car) the loss of value is due to depreciation. And I agree that is indeed a loss.
The IRS is not the least bit interested in being fair.

Sometimes the cars we are dealing with -gain value (appreciation) because of silly people like us that like them so much. So here comes the IRS to get their cut of whatever we have fallen into.

As I recall the IRS has entitled themselves to a cut of -any- financial gain. This includes illegal activities such as drug dealing (for example). Financial losses are rather restricted and tough to justify because an effort to give back money for any reason is counterproductive.

We the people (from the viewpoint of the IRS) are the bees that make the honey. The IRS is the bear that tends to smash the hive looking for a day of feeding.

Indeed. So, they want to tax APpreciation, yet screw us for DEpreciation.

 

[Richard Cranium]

I've never seen so many people worried about a simple car sale. What a bunch of worried old ladies!

 

[hunt2elk]

If you do a check or wire transfer, no sweat. No one's going to know anything about the sale unless you claim it on your taxes. With all the billions of dollars that exchanges throughout the country on a daily basis, your transaction wouldn't even cause a blip on anyone's radar screen.

However, if you get cash, just get one of those marker pens to verify that you aren't getting any funny money. And, if you do get cash and want to deposit it into your account, deposit it in less than $5,000.00 increments every few weeks.

This isn't entirely true RC. I sold a 69 Charger to a fellow in Germany several years ago. He paid by wire transfer to my bank. Fast forward to last year and I get lucky and get audited by the IRS. They subpoenaed all my bank records and find this wire transfer into my account. Of course I had paid cash for it many years ago and never titled it. I got to pay tax + interest + penalties on the whole amount. Also if dealing in cash, $9999. per day is the most you can withdrawal or deposit before your bank informs the Fed.

 

[biomedtechguy]

All the more reason to ABOLISH income tax and go to a federal VAT, flat, or "fair" tax federal sales tax...
The feds have NO BUSINESS knowing how much people make or how they make it unless they are the subject of a criminal investigation.

 

[Gone]

...and if you don't have the receipts for improvements you made to your car, you can always go through your archived credit card statements to retrieve past expenditures.

 

[Cranky]

I've never seen so many people worried about a simple car sale. What a bunch of worried old ladies!

View attachment 604235

I think it's more about keeping as much money as possible instead of letting the gooberment waste it on nations that hate us.....

 

[bschomske]

Man thanks alot from all who wrote in.I have a folder full of receipts and I will have to go through them.But bottom line i have way more in it then the sale...

 

[NJRR]

https://www.dmv.org/articles/income-tax-implications-of-selling-a-used-car/

Based on the info in here, you can claim a capital loss on a car but you do not have too. A Capital gain is required to be reported on your tax returns.