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Is selling your car considered Taxable Income?
Posted by: davemotohead ()
Date: June 28, 2011 03:30PM

Was talking to a guy at the auto club and he says that if you sell your car in CA now its considered Taxable Income and you will be sent a 10-99 and Have to pay the IRS taxes on the sale price of the car,,anyone Know of this?

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Re: Is selling your car considered Taxable Income?
Posted by: OttawaCorvairGuy ()
Date: June 28, 2011 03:34PM

I have no idea myself.

To be sure and protest yourself - I think it would be best to ask an accountant or H&R Block, in your area, that question?

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Re: Is selling your car considered Taxable Income?
Posted by: Pacerace ()
Date: June 28, 2011 03:46PM

Excuse me? I already paid tax on it when I bought it! (well, not on an older car, but if you buy it from a dealer)

IMHO, thats BS.

________________________________________________________

Chandler
Roswell, GA.


1965 Corvair Monza 110/4sp Coupe

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Re: Is selling your car considered Taxable Income?
Posted by: Chilly Willy ()
Date: June 28, 2011 03:55PM

I haven't heard that. if so,does it mean you can claim a loss when you sell it for less than you bought it? winking smiley

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Re: Is selling your car considered Taxable Income?
Posted by: wagbear ()
Date: June 28, 2011 03:58PM

Methinks, once a car is initially sold, it should'nt be taxed over and over again at "high" resale rates. Would be interesting for States to maybe impose a low "resale Tax" only.....
As far as a capital gains tax, that seems ridiculous. If so, one should be able to deduct parts, paint, labor, and the cost of green flannel shirts.

WAGBEAR
1961 Lakewood
Chehalis, Washington
( South of Canada...North of Mexico....Near Olympia ; Planet Earth . smiling smiley

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Re: Is selling your car considered Taxable Income?
Posted by: dedwinson ()
Date: June 28, 2011 04:06PM

Tehcnically speanking the Feds will want a bite of the income you receive that is over and above the cost you paid for the car.


Normally for regular cars you buy at the dealer, the retail value of the car tanks the minute you drive off with it, and any resale by you is at a value less than the car was worth when you bought it. Thus no net income to you.

Now if you are in the business of buying and restoring cars, it may be the case where you buy a car and then sell it for more than what you paid for it. This net difference is taxable, however, you are allowed to deduct any costs you had to "restore" the car to achieve the value you sold it for.

For most of us, that effectively means we don't pay taxes because the restoration costs generally far outstrip any value of the sale giving you a net loss.

The key thing here is to document all the costs associated with making the car ready for resale as this will reduce or eliminate the taxable income. I do mean ALL costs you can allocate to the car down to the sandpaper etc. If you paid anyone keep those receipts as well. These deductions are all part of the busines deductions on Schedule C of the 1040

IF you do have net income after all expenses, then technically you do have reportable income. This income is subject to both the employee and employer portions of Medicare and Social Security. I think that is running right around 15%. This is before ANY other standard deductions you get on the 1040.

So it is possible that after all deductions you might have a zero tax liability on your income, but still owe the 15% on the income from your business profits because that is taken right off the top. Oh and if you have a lot of these kinds of transactions, it would be wise to make quarterly estimated tax payments to avoid a major shock at tax time.

How do I know this? I did independent web design and consulting for about 5 years in addition to my regular "day job". This income had to be reported by me as income even though I didn't get a 1099 from the payor. The income was substantial enough that not reporting it would have been a big red flag.

I kept every receipt possible where I could tie it to the business expense. Obvious things like the cost of internet connection, cell phone, etc. I even made sure any ink for printers were deducted. Yet after all that I always got dinged and had to pay in extra at the end of each year even though I paid quarterly taxes on that income as well.

Some county sheriff deputies in our area deduct portions of their house payments as a business expense since they have to store their sheriff vehicles at their home. One guy has the patrol cruiser, patrol boat, snowmobile and a few other things he has to keep at home as part of his duities as a sheriff deputy. Again, he can do this because the property he is using is "in part" being used to generate his income.

Dave Edwinson
Doing Vairly well in Minnesota
'66 Vert 140HP
www.frontiernet.net/~dedwinson

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Re: Is selling your car considered Taxable Income?
Posted by: davemotohead ()
Date: June 28, 2011 04:08PM

This is California,,the tax me for everything state,,Our new governer Brown's campaign promises,,No New Taxes Without voter Approval!! He is trying to push dozens of new taxes now without Voter Approval,,LA county has 9.75 sales tax,,unemployment in ca is at the 11% mark,,I had to pay the IRS $600 this year because My Unemployment insurance that I got was considered Taxable Income,,it like another slap in the face for being unemployed for the first time in 32 years,,It would not suprize me in the least bit if CA tries to tax you on selling your old car.eye rolling smiley

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Re: Is selling your car considered Taxable Income?
Posted by: davemotohead ()
Date: June 28, 2011 04:15PM

This is what I was told,,registering a car in my name,,sale price on bill of sale is $100,,guy told me the seller will now get a 1099 for the sale price of the car he sold me,,the $100 price he will get taxed on,,I have sold cars over the years and have never had to pay taxes or recieved a 1099 for selling a old used car.

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Re: Is selling your car considered Taxable Income?
Posted by: azdave ()
Date: June 28, 2011 04:17PM

Just about anything you sell for more than you paid (profit) is considered as income and is taxed as such. This is nothing new. Just not many people report it as old cars are usually cash deals with little price doumentation or reporting. Even garage sale income is taxable if you are selling at a profit.

[www.irs.gov]

[dontmesswithtaxes.typepad.com]

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Re: Is selling your car considered Taxable Income?
Posted by: QM ()
Date: June 28, 2011 04:18PM

Actually Brown is putting all tax raising measures on the ballot, he did not put any tax increases in the budget that was just passed. And dave if you hate CA so much, why not move to Texas, they're defunding Planned Parenthood, are a right to work state iirc, and their umemployement is only 8%, so you should have all kinds of luck finding something there.... Plus you'd get the benefit of a Gov who wants to make Texas it's own nation!!!





Edited 1 time(s). Last edit at 06/28/2011 04:20PM by QM.

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Re: Is selling your car considered Taxable Income?
Posted by: bentley26 ()
Date: June 28, 2011 04:20PM

No... On the sale of the car the buyer pays sales tax. The only time the seller would be responsible for income tax would be if the vehicle had been previously claimed as a business expense (this includes selling as a dealer as well.)

Maybe also in a strange situation where it may qualify as a capital gain (original Shelby Cobra?), but otherwise dealer/business use are the only times you would have to pay tax on the income generated from sale.

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Re: Is selling your car considered Taxable Income?
Posted by: firevair66 ()
Date: June 28, 2011 04:20PM

Federal- only if it is your business ( dealership) and only on the profit , the state gets their cut on the selling price from the new owner when registered. In Pa , you can buy and sell up to 4 cars a year B4 you need a dealers license , If you register the overage in your wife's name you can double that. Sometimes that was my way around that.



Edited 1 time(s). Last edit at 06/28/2011 04:25PM by firevair66.

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Re: Is selling your car considered Taxable Income?
Posted by: Chilly Willy ()
Date: June 28, 2011 04:21PM

I believe someone would have to generate the 1099 and report it. I doubt your gonna do that winking smiley

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Re: Is selling your car considered Taxable Income?
Posted by: bentley26 ()
Date: June 28, 2011 04:22PM

If there are specific requirements for your state you should check your local .gov sites...

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Re: Is selling your car considered Taxable Income?
Posted by: davemotohead ()
Date: June 28, 2011 04:28PM

Hate is such a strong word,,lets just say dislike! I have lived here my entire life and remember when times were good,,I remember the last time brown was governer and opposed prop 13,,then when it passed with flying colors he tried to take credit for it,,I still have the newspaper front page artical,,we used to have a flourishing economy,,,but our state govrnment over the last 10 years has taxed business to death and most companies and even most of the Hollywood movie stuido's have moved to other states because they can survive,,I am planing to move eventualy.

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Re: Is selling your car considered Taxable Income?
Posted by: MonzaDave ()
Date: June 28, 2011 04:29PM

davemotohead Wrote:
-------------------------------------------------------
> guy told me

Never listen to what a guy tells you -- especially when it involves taxes.

Dave Keillor
Rochester, MN

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Re: Is selling your car considered Taxable Income?
Posted by: dedwinson ()
Date: June 28, 2011 04:36PM

I hear you all on taxes and states. Here in MN there isn't a tax they don't like.

Unemployment payments have always been taxable income. It does bite because it is the time when you least can afford the taxes, but if you look at it "purely" -- any income to you is taxable regardless of source.

Technically speaking the $10 your grandma sends you for christmas is taxable as well but nobody bothers with it.

In MN, as well as other states I imagine, the buyer of a car pays state sales tax on the retail value of the car. It used to be they taxed the stated value but so many people were "stating" their purchase price was $1 that the state now uses the book value instead.

The only way around this was "gifting" the vehicle to a relative. My father in-law literally gave us a car a few years ago, and it required all parties to be present at the DMV to fill out a special form. This is not likely to happen in a regular cash sale.

I suppose California is trying to take advantage of the newer IRS regulations that require 1099 forms for the smallest of transactions. It was talked about quite a bit with some of the regulation changes, but most people don't understand what a 1099 form is, or what the change really means so you didn't hear all that much in the news.

Dave Edwinson
Doing Vairly well in Minnesota
'66 Vert 140HP
www.frontiernet.net/~dedwinson

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Re: Is selling your car considered Taxable Income?
Posted by: OttawaCorvairGuy ()
Date: June 28, 2011 04:43PM

Taxes up here in this part of Canada is 15%

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Re: Is selling your car considered Taxable Income?
Posted by: 66vairman ()
Date: June 28, 2011 07:24PM

I've learned that you can't sit back and wait for some "guy" to tell you about taxes. Laws change each year. Keep up or get taken for a "ride".

Basically DedWinson is correct. If you sold the car for more than you paid for it and you made income. HOWEVER, if you bought a car for $4K, invested $10K to "fix it up" and sold it for $9K, you LOST money even though you sold it for more than you paid for it. You didn't make any INCOME because of legitimate expenses.

KEEP THOSE RECEIPTS!!

Wait - you say, I've owned it for ten years so inflation has raised the price, it's really not worth more than what I paid for it - yes! And now you know why folks have to hire tax accountants and lawyers.

Life is complicated - and we make it that way.

So you're thinking "A flat tax with no complicated deductions and loop holes would be great". Try telling someone they will lose their mortgage deduction if a flat tax takes affect and they'll come after you like a mad dog. --- We and businesses made the tax law mess, don't blame government for giving us what we ask for. It's called the "Law of unintended consequences" when what seems like a good idea goes wrong and nobody will back up and fix it.

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Re: Is selling your car considered Taxable Income?
Posted by: davemotohead ()
Date: June 28, 2011 07:38PM

The "some guy" was the guy doing the paperwork behind the counter at the AAA. it was not just "some guy" off the street. grinning smiley

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