Do you have to pay taxes when selling a car?

(3) On September 27, 2011 at 6:13 am JunoTeam [4] said:

I guess it depends;for example, the IRS considers your automobile a capital asset. So, if you sell the car for less than you originally paid for it, you have a capital loss and can't deduct the capital loss on your tax return. If you make a profit from selling the car, then you need to report the gain on the sale of the car and pay federal/state tax.The cost, proceeds, date bought and date sold would be reported on Form 1040 Sche D. Depending on how long you owned the car will determine if the gain was short-term or long-term.

(2) On December 21, 2010 at 12:52 am Lawdog1881 [117] said:

You need to make a distinction between sales taxes and income taxes. Sales taxes (if any are owed) are paid by the buyer, usually when he registers the car, if it is a private sale. If the sale is between a consumer and a licensed auto dealer, then it is the responsibility of the dealer to collect the sales tax from the buyer at the point of sell and pay the state and local taxing authority. The only way a bank would "own" the car, would be if it repossessed the car due to a loan default. In that case it would not be considered a sale, and no sales tax would be owed. Just because the bank holds the title of a car while the loan is outstanding does not mean the bank "owns" the car. The owner is the name that appears on the title.

As for income taxes, you would owe federal, state and local income taxes on the sale of the car if you made a profit from the sale. This almost never happens unless the car is a collectible. If the car was part of a business, you may owe taxes on it if you took accelerated depreciation on one or more prior year's tax returns.

(1) On June 30, 2010 at 9:48 am Naturalhealer10 [0] said:

So basically what I got from that is that as a private party seller you don't have to pay taxes on the sale? What if a bank ownes the car?

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