selling your used car

[Shortcut]

just wondering if sellers need to pay income taxes on the proceeds from selling their car?

 

[Jumpem]

I really doubt it. I never have.

 

[Kadarin]

Not sure about how the legal system treats it, but logically, selling an asset is not income, because you're just trading one asset (the car) for another (money). Income would be the difference between purchase and sell cost. Therefore, most likely selling a used car should be considered a loss, and possibly be deductible.... 😛

Disclaimer: I know absolutely nothing about either finance or tax law.

 

[Orsorum]

For Federal income tax purposes, whether proceeds are taxable depends on whether you have a gain (selling price is greater than selling expenses and price paid) or a loss (selling price is less than the vehicle purchase price plus selling expenses).

Personal losses are not deductible [IRC § 165(c)(3)]; gains, however, most definitely are. Sales of most personal automobiles will not have any effect because most cars are depreciating assets. However, in a few cases (antique cars, luxury cars) there could be a taxable gain on sale.

I don't know offhand if any states with personal income taxes differ from Federal rules regarding personal losses.

Keep in mind that if your state imposes sales/use tax the buyer of the automobile will be assessed use tax when he goes to register the vehicle. This is definitely a consideration for the buyer.