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Columns: Driving for Dollars
Driving for Dollars  
Driving for Dollars
If you make less from a car's sale than the original price, you aren't required to pay income tax.
Driving for Dollars

Pay federal tax on 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?
-- John

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Dear John,
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, then 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.

Bankrate.com's corrections policy -- Posted: May 15, 2009
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