Pay income taxes on a car’s sale?
Here’s a scenario: If Bob purchased a car for personal use for $12,000 in 2000 and sells that car for $1,000 this year, will he be required to recognize the $1,000 as income under the all-inclusive income concept on his tax return?
We’ve got good news and bad news for your friend Bob. The good news is no, he won’t have to recognize the $1,000 as income on his tax return. The bad news is he lost money on his transaction — $11,000. If Bob had sold the car for more than what he originally paid, he would need to report the profit as a capital gain.
And just in case you were wondering if Bob can take an $11,000 loss on the sale of his car this year, the answer is no. The tax laws do not allow individuals to claim losses from the sale of personal property.
If you have a car question, e-mail it to us at Driving for Dollars.